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Why voluntary still matters

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Everybody loves an exciting finish.

Remember the end of the Alabama-Auburn game this past season? A field goal attempt returned 108 yards for a touchdown. Super Bowl parties are always more fun when it’s a close game. Great stories and competitions hook us and keep us interested.

And then there’s the Affordable Care Act. Those of us in the benefits profession are watching this story unfold a little differently than the general public, and it’s not easy to know what that public is thinking. Are they interested in website complications and changing deadlines? How many people enrolled in the exchanges? Are people concerned about penalties assessed if they don’t have mandatory coverage? I suspect we’ll understand a lot more about public perception once the first penalty, err, tax is paid.

Unlike a movie tragedy or sports finale we watch for entertainment, the results of PPACA are going to stick around for a while. Open enrollment is complete and much has being done to work out the kinks related to the exchanges. Individuals must comply with the mandate that requires a person to be covered by qualifying health insurance in 2014 or pay a penalty. Employers with 50 or more full-time employees, in the meantime, have another year before they must offer qualifying coverage to qualifying employees. The administration allowed a delay in enforcement of the employer mandate to give employers more time to prepare for some requirements of the new law. 

One of the postponed requirements is to offer qualifying coverage to any employee who works more than 30 hours a week. Sounds simple, right? It’s not. The formula for determining whether or not an employee is full-time vs. part-time is quite complicated and definitely one of things for which employers needed more time to prepare. Many large employers have stated their intentions to send part-time employees to the exchanges for coverage while others intend to offer part-timers the opportunity to purchase the same qualifying coverage as full-time employees. Many employers are still wrestling with big questions like “Will we offer qualifying coverage or not? What employees will we support and what style of plan design do we offer?”

Where does that leave voluntary benefit plans for part-time workers? The benefit publications have greatly chronicled the opportunity for brokers with specialty and voluntary benefits, but from our perspective, employers are so focused on their major medical offering and complying with ACA that they are not paying attention to anything else. What are they passing on? Voluntary benefits that are attainable and valued by the part-time workers, such as fixed indemnity hospitalization coverage, outpatient benefits, dental, vision, life, critical illness and short-term disability plans. 

The need for voluntary benefits is especially pressing because of growing coverage gaps. Providing affordable and valuable benefits via payroll deduction offers a valuable layer of protection for employees.

In Texas, for example, if you make $21,000 a year then you might qualify for a subsidy. The monthly charge for an individual for a bronze plan would be about $20-$30 but would include a $5,000 or $6,000 deductible. Someone who makes $10/hour is going to have a hard time coming up with cash to pay for medical expenses until they hit their $5,000 deductible. For just $10 per week, a person can purchase guaranteed issue coverage that would pay in addition to the health insurance plan they purchase on the exchange. Employers can easily make fixed indemnity hospital indemnity coverage available via payroll deduction and included in that weekly amount would be dental coverage to help the employee maintain proper dental health. For $20 per week, a person could add outpatient supplemental benefits, critical illness and life coverage to the aforementioned plan. 

But convincing employers to provide voluntary benefits – even at little or no cost to the company – isn’t necessarily easy. Take the case of a large retailer that offers limited medical coverage to 35,000 part-time associates on a voluntary basis. The advent of exchanges and the promise of affordable care emboldened this company’s decision to send all its part-time workers to the exchange for all their benefits. The company is no longer hiring people who will work more than 29 hours per week. One problem for these employees will be affordability. As mentioned previously, even with a subsidy, many employees will need to pay a portion of the premium that will be onerous and will still be responsible for out of pocket costs until they reach their $6,000 deductible. Popular benefits such as dental and vision plans might be more difficult to attain as an individual. 

Conversely, take the case of a large casual dining restaurant group with more than 30,000 employees.  This firm dropped a limited medical plan that had been provided a waiver, but decided to offer packages of fixed indemnity and specialty benefits to its part-time employees. They believe that good employees are attracted to workplace benefits, regardless of part-time or full-time status. The ability for employees to purchase benefits helps retain employees. Even if employees only choose to pay for dental or vision insurance, the offer could pay off handsomely if turnover is reduced.

These employers have taken radically different paths when it comes to providing or not providing benefits to their part-time employees. How can the broker community talk to employers about coverage for part-time employees? It’s a large (and growing) workforce, yet it’s also complicated and time-consuming because of its high turnover. Why would an employer focus HR resources on its part-time workforce? And why would an employer offer benefits that don’t help individuals comply with the mandate to their employees? What’s the value in offering voluntary benefits? There are five key reasons:

  1. Voluntary benefits are a form of compensation and count when it comes to recruiting and retention.  Employers that need part-time employees may see increased competition for good workers as more employers look for part-time workers to fill their needs. Employees who purchase benefits through their employer have more to consider when it comes to changing jobs.  Hiring and training will always be expensive so tools to retain employees should be implemented.
  2. Employees trust their employer’s HR team more than their own decision-making when it comes to purchasing insurance.  Understanding the ins and outs of benefits is difficult.  Employees are not accustomed to shopping for benefits and would rather have someone with expertise aid their decision-making.  Simple options that have been vetted by HR professionals make employees feel better.
  3. Group benefits are almost always a better value than individual benefits.  Employers buy group coverage and pass on important features like lower cost and minimal to zero underwriting for the employee.  This make for a much simpler enrollment.  Making benefits attainable for part-time employees promotes participation in the system versus outright exclusion. 
  4. Payroll deduction is the most convenient way to purchase benefits.  Employees like it, even if post tax.
  5. Offering these benefits will not interfere with an employee’s eligibility to apply for and receive a subsidy through an exchange when purchasing major medical coverage. All the benefits mentioned will pay in addition to any qualifying coverage that an employee might have purchased. 

Employers who take the lead in offering part-time employees the ability to build out a benefit framework will win when it comes to hiring and retaining good employees. Restaurant groups, retail chains and staffing companies are facing hiring issues and many of them are turning to benefit plans to attack the problem. Look for product platforms that have experience with proper premium collection strategies when working with part-time employees and have an enrollment mechanism for this population. There are good options available for employers looking for affordable coverage for their part-time workforce. Employers who elect to offer voluntary benefits will reap the rewards in terms of employee morale and longevity. It doesn’t have to be hard and the right partner can easily support the requirements of this high turnover, sometimes complicated workforce. And that makes for an exciting finish that everyone is hoping to experience.

Brian Robertson is executive vice president of Fringe Benefit Group, which markets and administers Framework benefits for part-time workers.

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