By Dave Willis, CPIA

For the past few years, anticipation and rollout of the Patient Protection and Affordable Care Act have captured the attention and energy of voluntary benefits providers and their partners. The act and other changes in the health care arena spell opportunity for agents and brokers who want to bring voluntary products—and expertise—to their commercial clients and prospects.

“The biggest issue right now is that employers continue to face rising medical care costs in the face of the Affordable Care Act,” explains Jaede Barg, senior vice president, ACE USA. “They’re concerned with raising employee deductibles and coinsurance obligations while managing major medical costs.”

According to Rob Shestack, senior vice president and voluntary benefits national practice leader at AmWINS Group, “The voluntary benefits industry is growing rapidly, as brokers and agents are recommending, employers are offering, and employees are enrolling in these benefits at a record pace.”

He says agents and brokers are using voluntary products to fill the gaps caused by decreasing revenues in traditional health care coverage. “Employees are buying these programs to gain additional coverage,” Shestack notes, “and employers want to provide them to improve recruitment and retention.”

Thomas Petersen, RHU, vice president of Petersen International Underwriters, points out that the complexity and in some cases liability of benefits is increasing and business owners want to shift some, most or all of the decisions to their employees. “This is not to say employers don’t want to offer benefits,” he remarks, “but rather it’s about the decisions of what employees want. Also, there’s an increasing view by employees that employers should not make decisions for them, but at the same time employees want more and more benefits.”

Adds Len Cavallaro, head of voluntary marketing at Reliance Standard Life Insurance Company, “The task of putting together a benefits portfolio is more complex for employers and especially for employees. Both need and want advice. This is an opportunity and an obligation for agents and brokers. No longer can you squeeze an analysis onto a spreadsheet and ask the employer to pick an option.

“Full understanding of the myriad options and potential pitfalls requires much more adviser knowledge and effort today,” he adds. “The adviser who truly wants to distinguish himself through superb service must meet this challenge, and then adapt his efforts all the way to the work force, removing the employer from the position of de facto adviser to its employees.”

Petersen points out that employers are concerned about what more might be mandated by legislation and what added reporting might be required. “These excess burdens on employers add to the shift toward more and more voluntary benefits,” he notes.

David Underhill, vice president of voluntary products at Cigna, also sees a “relative grayness around the effects of health care reform. From a federal level there is more clarity, but each state has its own take on benefits and interpretations. That’s a key challenge that will settle out over time.”

The advent of benefits exchanges—online benefits marketplaces—and their effect on the market is another issue. “There are many exchanges,” Underhill notes. “Some are more successful than others. Five to eight years from now, how many will still be around and how many will be consolidated? Exchanges are a catalyst to move to defined contribution from defined benefits, and they’ll really change how we do business.
“Agents and brokers need to understand how they’ll bring value with these new models,” Underhill adds. “Customers have much more information than ever, and there’s a great sense of transparency from an insurance perspective. As defined contribution exchange models combine with a movement to customer choice, agents must find a way to fit into the sales mix.”

According to Petersen, voluntary benefits are increasing in popularity across the board. “This means opportunities for agents and brokers are increasing,” he explains. “Even when programs already are in place, adding extra ones, such as excess/supplemental disability insurance and other programs, offers more sales opportunities.”

“Historically,” says Shestack, “life and disability voluntary benefits have led the pack. However, the recent focus has been on critical illness and accident coverage, which not only fill gaps but also provide financial protection. Medical gap programs are becoming increasingly popular and will likely see the largest participation increase vs. 2014.”

He says other programs, such as telemedicine, are becoming more prevalent in employer offerings, as are lifestyle products like identity theft, roadside assistance, group legal, consumer purchasing and similar programs.

Agents and brokers should be prepared to deliver employer and employee advice and context in the benefit decision-making process, Cavallaro says. “The historical group approach, pushing products in a disconnected, siloed fashion, leaves employees with many questions about what to buy and in what amounts,” he observes.

“The traditional product-driven, ‘single file’ decision and enrollment process often send employees back to employers for counsel and advice,” he adds. “Employers want to feel confident they’re providing an appropriate slate of solutions that will enable employees to get their benefit needs met—and that’s it.”

Cavallaro says employers want agents or brokers to put that slate together and to provide critical support and advice that employers are ill qualified and uncomfortable to give. “Understanding what customers really want and providing solutions, rather than pushing products, is where the opportunities lie,” he asserts.

Underhill concurs. “Agents need to be a greater part of the process, learning and thinking about employee needs and responding,” he says. “It really is an educational process. We need to come to employers with good insight about their employees. We have to talk to them about what their employees are looking for. If the broker can facilitate that conversation, that will be key.”

Employer size makes a difference. “Voluntary benefits appeal much more to mid-sized to larger employers that don’t generally buy ancillary products for their employees,” Barg says. “We highlight our hospital buffer plan, which is a simple-to-understand product available through payroll deduction. It’s meant to cover a deductible and maybe some coinsurance obligation for hospitalization. We try to tailor it to the employees’ deductible so that, if they have a hospitalization, they have some cash.”

Barg adds, “Critical illness is a good fit, depending on what employees have left to spend out of their paychecks.” The suitability of the coverage varies with the kind of industry. “For instance, in high tech, where employees have more disposable income, rounding out with perhaps some voluntary AD&D, critical illness or accident medical above and beyond a gap plan would certainly make sense on a voluntary basis,” he explains.

“Voluntary products have traditionally been very well received in hospitality industries—food service, housekeeping, cleaning services—as well as retail,” he notes. “And the persistency is good.”

James Rosseau, president of LegalShield Business Solutions, says agents and brokers need to lead with the notion of adding value through their product offerings. “The value discussion with HR staff revolves around how to help the employer keep employees working,” he notes. “That’s the number one issue: reducing absenteeism and ‘presenteeism.’ ”

He says both of these phenomena have huge dollars associated with them. “Presenteeism—employees being at work but not totally focused because things at home are distracting their attention—costs firms $150 billion a year,” Rosseau says. Identity theft and legal concerns are top issues that drive presenteeism.

“Identity theft is a persistent issue that’s getting worse as criminals go downstream, moving beyond elders to mid-life folks and young adults, and now to teens and below,” Rosseau explains. “Some 36% of those affected report moderate or severe emotional distress, and this is where employers have the biggest stomach ache. Without getting proper help up front, employees are less productive.”

Capitalizing on opportunities
To make the most of the market potential, Petersen encourages agents and brokers to develop a plan and/or package of plans to offer employer clients. “Before going to the employer with a set package, try to determine what employees desire,” he advises. “Traditionally, voluntary benefits have been sold with little employee input.”

An employer that includes them will be seen as a hero for having insurance plans that employees requested, he adds. “Building a relationship with each employee increases the opportunity to sell individual plans to the employees,” Petersen says.

Rosseau concurs with the notion of adding value. “Lead with conversations about keeping employees more productive,” he says. “Talk about challenges families and employers face. Make employers aware that employees are affected by things like identity theft and legal issues, and that this can lead to lost productivity. Then introduce a voluntary benefit that will help them get in front of the problem early on.”
Barg stresses the importance of understanding underlying major medical coverage and the employer’s pain points. “Listen to the employer,” he says. “Get involved with their major medical renewal or, if they self-fund, pay attention. Work with carriers that stand firm and back a broker or consultant and see new products that evolve.”

He also suggests considering how a fixed indemnity or limited medical product might serve part-time and/or contracted employees who don’t qualify for major medical coverage through the employer. “We are seeing requests for that, because some coverage is better than nothing at all,” Barg comments.

“Agents and brokers interested in the voluntary benefits space should focus on two key partners,” Shestack notes. “First is an enrollment firm that helps with employee education and communication and helps manage implementation, enrollment and administration. Second is the carrier. More carriers are in the space than ever before, and competition is getting fierce—in product design, rates and underwriting concessions.

“Agents in the space who have a pretty good feel for the industry, in addition to focusing on a solid enrollment firm partner, need to construct a solid voluntary benefits offering that fits the employee demographics,” Shestack adds.

“Talk about consumer-directed health plans and also how accident, critical illness and hospitalization products can complement them,” Underhill suggests. “Get with consumers and understand potential solutions. Customers are more and more educated, and they’re looking for alternatives.

“Once you get past figuring out how to protect them from financial devastation, consider other opportunities,” he adds. “A good example is pet insurance. There is a significant market for that.”

Underhill says brokers also need to figure out how they’ll operate in the private exchange arena. “Will they become navigators to help employers decide if an exchange is right for them?” he asks. “And if that’s the way the employer wants to go, which exchange should it consider? Brokers should be up to speed on that.”

Cavallaro points out that large brokers are acquiring, building and integrating resources to offer a comprehensive slate of benefits. “These include both traditional products that cover basic needs and ‘worksite’-type benefits that fill gaps specific to a given employee’s situation,” he says. “In addition to the ability to present product, these solutions include decision support, enrollment technology and benefit administration.”

While these solutions frequently include broker branding, he says, they’re often the combined work of various partners, including enrollment, administration, education and decision support vendors as well as insurance carriers and their product design, communication and support services.

“Independent brokers can access these same vendors and partners to put together robust solutions previously unavailable to them,” Cavallaro asserts. “Technology and collaboration let independent players compete with the largest national brokers. Education is key, of course, but the proliferation of resources means that independent brokers need not commit large sums of capital—or own every resource in the continuum—in order to compete.”

Barg sums up the issue—and opportunities—like this: “With full ACA rollout, employers will continue to struggle with costs, passing more on to employees and at the same time seeking voluntary or gap options. Agents must familiarize themselves with the major medical marketplace and employer and employee needs, and learn how supplemental products might help mitigate added employee costs and out-of-pocket expenses.”