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February 22, 2016 at 07:00 PM
According to a recent Eastbridge study, 92 percent of benefit brokers are selling voluntary benefits. Out of the remaining 8 percent, half plan to sell voluntary in the future.[1] That said, you’ve seen firsthand how the insurance industry is changing right in front of us. Before the Affordable Care Act changed the way health insurance was purchased, voluntary benefits were often sold at the worksite as an employee perk or convenience and often managed separately from major medical plans and/or enrolled off-season. Doing so inadvertently reinforced the perception that voluntary benefits were an added bonus and not a fundamental part of a health benefits plan. But the reality today is that none of us can afford to position voluntary benefits as voluntary — they are fundamental benefits that fortify any health plan.
As health care costs continue to rise and employers shift more costs to employees, the value of voluntary benefits is greater than ever before. Consider, a workers’ average contribution to family coverage has increased 81 percent since 2004.[2] This means that the average annual premium for family coverage with an employer-sponsored health insurance plan is now close to $17,000.[2] Health care costs will continue to rise as they always have, but the employees’ financial risk does not have to grow along with it. The innate flexibility of voluntary benefits allows for personalized coverage options without directly increasing the employers’ share of cost. Seventy percent of employees say they’re likely to purchase voluntary insurance if the benefits were offered by their employers.[3]
Benefits are a way to manage financial risk
We get it. The details of health insurance policies are things most people would rather not think about. In fact, almost half of employees confess to spending less than 20 minutes preparing for and selecting benefits each year.[4] Many people spend more time researching a new car or planning a vacation. In fact, nine in ten typically choose the same benefits year after year.[4]
The problem with that is that a traditional employee benefit pyramid relies on perceived needs, not financial risks. For example, ancillary benefits like dental and vision are common parts of an employee benefit package. The plans offer low premiums which make them attractive, but they do much less to help protect someone from financial ruin.[5]
The maximum single event benefit for a root canal is $1,500 under most dental plans. Vision plans may offer $1,000 for Lasik surgery. Compare that to a $50,000 maximum benefit under most critical illness plans. Yet, only 30 percent of companies offer critical illness plans to their employees, while 95 percent offer dental and 83 percent offer vision.[5]
In a recent study conducted by Windsor Strategy Partners, their analysis of a specific sample case showed a 1 in 10,000 chance of receiving more than $3,000 in claims payment over 10 years from one’s vision insurance carrier; a 1 in 1,000 chance of receiving more than $5,000 in claims payment over 10 years for dental; but a 1 in 10 chance of having a critical illness diagnosis over 10 years which could cost you $34,000.[5]
This is a glaring example of where perceived need outweighs financial risks but shows an opportunity for brokers to help educate clients and their employees about the correlation between benefits selection and financial risk.
