VOLUNTARY BENEFITS: AN EVOLVING FIELD

Employer responsibilities, employee contributions, and the ACA

By Len Strazewski


Driven by a changing employment environment and prodded further by health care reform, voluntary benefits-sold to individuals at their worksite-are evolving rapidly.

Recent research from two of the nation's largest voluntary benefit providers points to increasing demands from both employers and their employees for a broad range of voluntary benefit products that meet increasingly complex needs.

The evolution, however, is part of a long-standing pattern of growth, says Rich Williams, senior vice president of growth markets at Colonial Life & Accident Insurance Co. in Columbia, South Carolina, one of the largest voluntary benefit providers.

Colonial recently celebrated its 75th anniversary, Williams notes, marking service to three constituencies: employees, employers and agents and brokers.

"Voluntary benefits have developed into a lifeline for the American worker, as employees seek to meet their needs for financial protection and benefits not provided as part of a group structure by employers," says Williams. "Employers, meanwhile, continue to fight a battle to recruit and retain the best employees and have adopted programs of voluntary benefits to enhance their group benefits package."

Agents and brokers also have benefitted from the growth of voluntary benefits Williams explains, as they have sought diversification in both their product offering and income streams. "Once upon a time, group benefits professionals were not very interested in voluntary benefits, but that has changed dramatically as the needs of employers and employees have changed. Today they are much more interested," he says.

Previously available primarily to the employees of large companies, voluntary benefits have most recently become attractive to small employers with fewer than 100 employees, he says. "Our research shows the concerns of their employees aren't that much different than larger firms when it comes to personal finances. Employees in companies of all sizes tend to worry about having enough savings to retire, to cover an emergency or to cover being out from work if they're injured or sick. But small employers do have options when it comes to providing competitive benefits packages," says Williams.
An online survey of more than 1,000 U.S. employees (full time and/or part time) conducted by Harris Poll on behalf of Colonial, revealed the percentages of employees working at small businesses who are concerned about several financial issues:

  • Not having enough savings to retire as planned: 50%
  • Not having enough savings to cover an emergency: 39%
  • Not having enough savings to cover a period of being unable to work due to an illness or injury: 39%
  • Losing their job: 33%
  • Not being able to afford medical costs not covered by their health insurance: 32%

"Small employers value their workers and want to provide good benefits that address their individual needs," says Williams. "Yet today's economy and a changing regulatory environment make them hesitant to add new benefits. Voluntary, employee-paid benefits give small businesses a way to offer a competitive benefits package without impacting their bottom line."

The Colonial Life poll identified employee interest in:

  • Life insurance: 49%
  • Short-term disability insurance: 46%
  • Critical illness insurance: 40%
  • Accident insurance: 40%
  • Cancer insurance: 21%

"Small employers don't have to settle for small benefits packages," says Williams. "They can enjoy many of the same advantages as their larger counterparts. Voluntary benefits can be a tremendous asset to small businesses looking for a cost-effective way to compete in the marketplace."

About 47% of employers are planning to ask employees to bear a greater portion of their benefits costs in 2014 in anticipation of the enactment of the Affordable Care Act.

Colonial has also introduced what Williams calls a "non-group chassis," an online enrollment tool that is designed to simplify individual analysis and purchase of voluntary benefits. The tool may be particularly valuable to individual workers who are directed to government or private insurance exchanges for purchase of personal health insurance.

Guardian Life Insurance Co. of America in New York also notes increased interest in voluntary benefits and a growing diversity of products, notes Phyllis Falotico, assistant vice president of group marketing.

According to the company's second annual Guardian Workplace Benefits Study, employees value their workplace benefits more than ever, as measured by Guardian's Benefits Value Index. The score for 2013-released earlier this year-rose to an average of 7.1 (based on a scale of 1 to 10) up from 6.8 in 2012.

The study analyzes responses from two Internet surveys of 1,704 benefits plan participants and 1,007 employee benefits decision makers, conducted in September 2013.

About 80% of employees surveyed obtain all health and disability insurance as well as retirement savings through their employer, and 79% state that benefits are crucial for staying with a job.

"The goal of the Workplace Benefits Study is to measure the role employee benefits play in workplace satisfaction on an ongoing basis, and to highlight the need for employers to better understand how benefits contribute to the overall financial well-being of their employees," Falotico says. "The 2014 study captures an interesting dynamic between the increased importance of workplace benefits for employees, the need for employers to better manage the costs, and the responsibilities associated with offering or accessing coverage-from employer communications to employee education."

The Guardian study identifies a growing disconnect between employers and their workers, she explains. Employers are seeking opportunities to shift more costs and responsibilities to their employees at a time when these benefits are becoming more critical to the workers' overall financial security and well-being.

About 47% of employers are planning to ask employees to bear a greater portion of their benefits costs in 2014 in anticipation of the enactment of the Affordable Care Act.

New plan designs, such as high-deductible health plans, create ways to shift some costs to employees while maintaining employer-based health benefits, but also create challenges for employees, she says.

"For employers, keeping employees at work is more important than ever, creating a need for more diverse benefits to help employees meet personal and family needs. At the same time, employees are realizing the value of their benefits as they make more health decisions. They have realized that they must pay attention to their benefits and the decisions that are part of the process," says Falotico.

Just over half of employers surveyed believe they've been successful in preparing for a post-health care reform era of benefits, but only 22% feel "well prepared" to discuss these changes with employees, the study indicates.

"The reality within the industry today is that employees are being asked to shoulder increasing responsibility for their benefits, so it's extremely important they have a solid understanding of their options and personal relevance of the benefits offered," Falotico says.

As a result, employers are reaching out to their insurance companies, agents and brokers for administrative and communications support.
Falotico says, "While the responsibility of benefits costs may be shifting, it's still essential for companies to ensure that their employees have expert financial planning advice and a clear understanding of which workplace benefits are best for their particular situation. Our study shows that increasingly employers are seeking assistance in these areas from experts outside the company."