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"Employees are concerned about the ACA and any additional expenses that it might create, but they don't as yet recognize the value of voluntary benefit choices as a way of dealing with those costs." —Bob Ruff Vice President, Broker Market Services Colonial Life and Acccident Insurance Co.

Benefits Business

Boosting voluntary benefit participation

Agents can help plan sponsors overcome tepid employee interest

By Len Strazewski

Voluntary benefit programs seem like the perfect complement for employers, employees and the agents who market them. The products supplement group medical and disability coverage at no additional cost to employers, and the revenues they generate are a welcome addition to group insurance commissions.

But year after year, sales are a little disappointing. With every open enrollment period, many employees fail to participate in annual enrollment events, ignore benefit communications and choose not to invest in additional coverage.

Two of the biggest voluntary benefit insurers have been digging deep into the behaviors and attitudes that drive participation and have some suggestions that may help build sales the next time around.

Colonial Life and Accident Insurance Co. in Columbia, South Carolina, and Harris Interactive polling company in Rochester, New York, surveyed 2,046 U.S. adults, including 1,023 active employees. Voluntary benefits did not rank high among consumer choices. And prospective voluntary benefits purchasers spend little time researching coverage.

The survey revealed that only a tiny number of respondents (3%) would consider purchasing additional life, disability or accident insurance if they were given an extra $200 of income. About 45% would pay off debt and 38% would make a savings deposit. Dining out, travel and purchasing a new electronic device all ranked ahead of more benefits.

Respondents also noted that they would be more likely to spend a week or more researching the purchase of a new car or a vacation than making a voluntary insurance purchase. Only 38% said they might spend a week or more learning more about insurance, compared to 55% for buying a new car and 41% on a vacation.

However, respondents reported concerns about paying for various health-related expenses. About 83% reported some concern about paying for increased premiums, and 82% about increased deductibles, increased co-pays and expenses no longer covered by their group health plan.

Bob Ruff, Colonial Life vice president of broker market services, says the results were not much of a surprise. "I think we have known and accepted for some time that a lot of Americans don't understand the process or value of insurance and even fewer understand the value of voluntary benefits."

But he notes that the survey does indicate that employees recognize the high cost of health care and the likelihood of increased costs. Individuals are also concerned about the quality and value of their health insurance under health care reform.

But almost half of respondents (47%) said they were not very or not at all informed about how health care reform will have an impact on their health care and only 36% said their employer is a reliable source of information on health care reform.

"Employees are concerned about the Affordable Care Act (ACA) and any additional expenses that it might create, but they don't as yet recognize the value of voluntary benefit choices as a way of dealing with those costs," Ruff notes.

Hospital indemnity plans and other products can help fill in coverage gaps created by increased deductibles, and cancer and critical illnesses insurance can help pay expenses not covered by group medical.

"Many individuals also don't recognize that their ability to earn a living is one of their most valuable assets and if they lose that ability, they could be in a desperate situation. It's important to make sure people understand that voluntary benefits such as additional life insurance and disability insurance can provide some security against the loss of that asset."

Agents and brokers can help employers communicate the value of benefit options by being a reliable source of information on regulatory issues, he says.

"Agents need to make sure their employer clients are up to speed on the regulations and the responsibilities that employers and their employees undertake with those regulations. The increasing complexity of the ACA makes that challenge all the more important.

"Employers are likely to lean on their brokers and consultants for help in educating their employees about what they need to do and how to do it."

The ACA and the health insurance exchanges that have been established by the law may also make group health insurance somewhat of a commodity, he says, with mandated plan designs. As a result employers may need to restructure their group benefits to meet their strategic goals.

"Why do employers provide benefits? To take care of their employees, for sure, but also to improve retention of their best employees. If health insurance becomes generally available to individuals, employers will have to modify their benefits to meet the same goals."

Agents and brokers will have to provide additional guidance and may also have to shoulder some of their clients' administrative burdens, he says. Many employers are moving toward a defined contribution model for their employee benefits programs which would require a series of decisions from employees about their choices.

Ruff recommends that agents and brokers help employers design simple communications and checklists that can support those decisions.

New York-based MetLife draws on its 11th Annual Employee Benefits Trend Survey for six strategic suggestions for better voluntary benefits participation, according to Michael Fradkin, senior vice president of voluntary and worksite benefits.

The study polled 1,503 benefit decision makers and 1,422 employees in October 2012. Notable among the findings was documentation of poor employee participation. About one in every three employees does not engage in annual benefits enrollment and less than half of employers—about 42%—are satisfied with employee participation.

"Our research indicates that the majority of employees are on 'autopilot' when it comes to enrolling in the employee benefits provided to them through their work. As a result, when employees simply roll-over the previous year's selections, they are often missing out on important new coverage options and potentially leaving money on the table," he noted in a report on the trends.

"There are also significant advantages for organizations when their employees take a more active role in their benefits to enrollment. Employees who actively engage in reviewing and evaluating their workplace benefits options are three times more likely to be satisfied with their jobs and more than twice as likely to recognize and value the benefits offered through their employer."

MetLife recommends that employers and their agents:

—Upgrade their enrollment experience. More than half of employees who say they are engaged in the benefits enrollment process compare their experience favorably to the best online shopping experience.

—Use a simple and straightforward enrollment process. Reduce complications and increase engagement.

—Aim for online enrollment. About 42% of employees say they prefer online enrollment, but only 35% say they have access to online enrollment.

—Communicate clearly. More than half of respondents say they prefer receiving personalized information reflecting their needs and life stages.

—Communicate frequently. About 43% of respondents noted that ongoing benefits education would be very helpful.

—Foster feedback. About 40% of engaged respondents reported that their employers obtain employee feedback on how to improve communications and processes.

The author

Len Strazewski has been covering employee benefits issues for more than 30 years. He has an M.S. in Industrial Relations from Loyola University in Chicago.

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