2012 Voluntary Benefits Special Report
Employers are getting creative
The new ball game
It's no secret, American employers are between a rock and a hard spot. How can they control their employee benefits costs and still retain and attract quality employees? That's the real question that's keeping HR directors awake at night. As a result, they are being forced to find creative approaches to help in this area. Today, employer after employer is beginning to rediscover the advantages of voluntary benefits. Not long ago, voluntary benefits were being viewed by many employers as having negative connotations. They were characterized as pressurized sales that frequently ended in buyer remorse. But times change. Today, voluntary benefits are quickly becoming the "go-to" answer to the current benefits conundrum.
It may appear to some to be a rapid market change. But, according to Mike Witwer, vice president, Cigna Voluntary, the advances in the voluntary market have never really stopped. He notes that there is currently a convergence of traditional group voluntary coverages such as group health, and group disability, which were considered "worksite" products, with those that have been, at one point or another, considered to be individual products. These would include insurance products such as universal life, critical illness, and accidental injury which are now also being sold at the worksite. As a result, he says, today's voluntary market can be characterized as group and individual products which have converged into a hybrid set of products. They are typically offered on a group basis with guaranteed issue and a multi-delivery system, which Witwer says includes such things as online enrollment, telephonic enrollment and traditional worksite enrollment. As a result of this movement, he notes that it is becoming increasingly difficult to differentiate individual from group policies. At the same time, however, it is a perfect example of the creative approaches that are currently going on in the voluntary benefits arena.
Witwer also notes the popularity of voluntary benefits with both employers and employees. "There's no question about it. What we have seen in the marketplace today is employers really struggling to find their overall benefit packages that provide flexibility to the employees." Employers have had to shift from traditional employer-funded benefits and are now asking employees to shoulder 100% of the cost.
Education makes the difference
The net result of many of the changes occurring in today's benefit marketplace is that individuals (i.e., employees) are being requested to be better consumers. At Cigna, Witwer notes, "We are now focused on individual customized educational experiences so that employees can make more informed benefit choices." He goes on to state: "Our entire approach is focused on educating the individual employees, thus creating a personalized experience for them so they can be better prepared to navigate this new world of benefits." He points out that going forward, an educated consumer is an absolute requirement and, he says, "We have developed an educational program titled Smart Benefit Choices that uses true life, interactive scenarios." These allow employees to select a benefit plan that matches a personal profile of their individual situation. Currently Cigna is offering educational programs for voluntary life, voluntary disability, and voluntary accident policies. However, he indicates that their educational programs will be expanded this fall to include critical illness and accidental injury coverages as well.
It's important to note that there are still significant differences between traditional term life policies and voluntary term life policies. Witwer indicates that the biggest difference is that "when you offer voluntary products on a group basis, group underwriting is factored in." And he indicates that "this affords many more people the opportunity to purchase coverage without having to go through individual medical applications." There is no longer a need to prove you're medically fit," he says. "Coverage is automatic for those people participating in the group program."
This is by far one of the biggest advantages to the voluntary market since group underwriting now provides automatic, guaranteed coverage. But, Witwer points out, "There is an upper limit to these policies." Should an employee want additional amounts over and above the guarantee issue amount, "they would be required to go through the normal underwriting process."
Future estimates for voluntary coverages
Witwer indicates that Cigna believes "there is still significant growth in the voluntary market." He says you need only to look at several dynamics of the marketplace to realize where this is all headed. The first dynamic is health care reform. He notes, "As it begins to come into play, over the next year or two, the healthcare reform act will provide access for more individuals." However, it does not do much to help lower costs. So he thinks that higher costs will continue to play out. "We may even see increases in the need for voluntary products."
The second dynamic "deals with better education provided to consumers at the workplace," Witwer says. The insurer expects more opportunities for voluntary benefits based on the additional education that it is providing.
Combined, both of these dynamics indicate that the voluntary market still has significant growth potential.
For Cigna's part, it provides voluntary benefit products on a stand-alone basis. Thus, coverage is available to agents and brokers and their clients without having to maintain other Cigna coverages. Witwer does note, however, that two new products are being placed online soon: critical illness, and accidental injury and, while these will be sold on a stand-alone basis, it would be important for an employer to have a core medical coverage benefit in order to have supplemental medical products such as these be effective. "They really do not lend themselves to stand-alone-type products, but rather fill a gap in coverage for costs that are not considered normal medical expenses."
He adds, "It's important for mid-sized agents and brokers to take advantage of the opportunity presented in this marketplace." He suggests that they first sit down with their clients and talk about their individual benefit situation. Voluntary benefit products can assist employers and employees by offering programs of value, through such advantages as guaranteed issue coverage, payroll deduction and ease of administration. But, he adds, at the end of the day, it's all about the employers providing voluntary benefits to fit the unique needs and situations of their employees.
The primary thing that brokers can do for their clients is discuss how voluntary benefits can fit into their overall benefit portfolio. Educating the employer is often as important as educating the employee—both need to be better consumers.
In a recent study, Witwer notes, employers have been concerned about whether employees are dropping these types of products. However, he notes, this has not occurred. Now these products are even starting to be portable, where the employee can move from one employer to another and continue the coverage simply by paying the premium on a direct basis. At the end of the day, Witwer says, voluntary benefits can represent a win-win situation for both the employee, and the employer. It can provide good coverage for the employee, and the employer gets value from knowing they have satisfied employees with customized benefit package.
It's obvious at this point that the benefits market has gone through significant changes in the last few years and, more important, it is not done yet.
Agents and brokers that are able to take advantage of these emerging situations, through the use of voluntary benefit programs, will not only be providing an excellent service for their clients, but their clients' employees as well. Witwer says that "flexibility is a key component to today's voluntary market." It allows employees to pick and choose the coverages that are best suited to their individual needs. It's all about education and personalization when it comes to satisfying the need for a competitive benefit program, while not breaking the bank.
As far as Cigna is concerned, Witwer notes, "We are committed to making voluntary benefits one of our company's highest priorities. We are also committed to making sure we educate our clients (employers) and their employees to become better consumers. This is no longer the voluntary market of the past," he states. Such things as payroll deductions, convenience of the marketplace, portability, and group underwriting all speak well to the value of the product. Brokers, Witwer says, should be actively involved in informing their clients of the advantages that this market can provide, and how it can be used to solve the unique dilemma that is employee benefits in 2012.
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