The voluntary market in the era of PPACA
Executives foresee new packaging & products
By Len Strazewski
Simple choices for employees, better relations for employers and a steady revenue stream for agents and brokers. For more than 30 years, voluntary employee benefit programs, marketed at the worksite, have been important strategic tools for agents, brokers and their clients.
But the changes to employee benefit programs triggered by the Patient Protection and Affordable Care Act (PPACA) are also likely to bring change to voluntary benefit programs, creating new opportunities for producers, but plenty of new complications, industry executives say.
Jim McGovern, vice president of sales and service for American United Life, a OneAmerica company, says he expects employers will be making big changes in their insured health benefits that could affect their use of employee benefits advisors—and subsequently agent and broker revenues.
"For decades, designing and marketing medical benefits has been the single largest task for benefits brokers," he says. "And designing and marketing group medical benefits has provided the largest portion of revenue for benefits brokers and consultants. But as Affordable Care Act provisions are implemented, employers will be rethinking their health benefits."
Some may be stepping away from the role of medical benefits provider and others may be modifying their health benefits plans to comply with new plan designs available from state health insurance exchanges and independent health plans.
But even if employers do opt out of providing group health benefits, they are still likely to be providing some employee benefits that support their ability to recruit and retain superior employees and maintain their market competitiveness, McGovern says. And they will continue to need the strategic guidance of their benefits specialists to design new benefits packages that will meet their market goals with minimum costs and administrative burdens.
McGovern says voluntary benefits are likely to evolve into strategic replacements or additions to employee benefit programs, providing both traditional benefits in new packages, and completely new benefits that meet the individual needs of a diverse workforce.
Employers, he says, are moving steadily toward a defined contribution philosophy, limiting their financial commitment to employees, but asserting their ability to help provide a range of filtered and vetted options to employees that will meet their perceived needs.
For example, as employers and their employees move steadily into consumer-directed health plans with large deductibles such as Health Savings Accounts and Health Reimbursement Accounts, many workers will value ways of funding the deductibles, co-pays and uncovered services. Some insurers are already offering gap insurance designed specifically to fill in those funding and coverage gaps.
Voluntary benefits are all about choices, McGovern says, and while young, healthy employees may appreciate the financial value of high-deductible health plans, employees with families or health issues may appreciate the opportunity to buy gap coverage, vetted by their employer and paid incrementally through payroll deduction.
Supplemental life insurance, short- or long-term disability insurance, critical illness and cancer insurance are already popular voluntary benefits, he notes. But each has its limitations, providing benefits for specific life episodes. The next step in their evolution may be hybrid benefits—packages of consolidated products that will provide financial security for a variety of situations.
McGovern foresees packages that could include, for example, life insurance, critical illness insurance and long-term care insurance that would provide protection against the diverse and continuing financial costs of catastrophic illness.
Voluntary benefit marketers are also likely to consolidate financial value into lump-sum disability programs that respond to several medical, financial or life episodes and complement benefits provided by traditional individual products.
The majority of bankruptcies are already triggered by uninsured medical-related expenses, McGovern notes. But no single product now provides the level of protection that these kinds of events demand, he says.
McGovern also anticipates a marketing revolution as employers and their brokers package and promote voluntary benefits in more sophisticated ways. He recommends that employers and insurers group their benefits into levels, such as Gold, Silver and Platinum, reflecting the financial value and providing benchmarks for employees as they make their choices.
Employers that opt out of group health benefits or who reduce the overall value of medical benefits may also seek other types of voluntary benefits to expand the perceived value of their benefits plan.
Elizabeth Halkos, chief marketing officer of Atlanta-based Purchasing Power LLC, a voluntary benefits provider, says recruitment and retention of top employees will remain a priority for employers, despite the disruption caused by health reform. As a result they will turn to voluntary benefit programs to economically provide diversity and value.
She points out: "Voluntary benefits are an important addition to a competitive employee benefits package. They can be used to help employers strengthen their benefits package while they address the impact of health care reform."
Halkos predicts the percentage of employers offering voluntary benefits will increase and those that are already offering voluntary benefits will add more options in the coming years. And non-traditional benefits that extend voluntary offerings beyond life and health insurance—group legal plans, financial planning services and product purchasing programs—will grow in popularity, marketed as financial support tools.
"Despite improvements in the economy," Halkos says, "employees continue to be burdened by day-to-day financial concerns. The distractions and the resulting levels of stress seriously affect their workers' health and productivity. Employers are just beginning to realize what this impact means to their bottom lines and are taking steps to improve workers' financial health by increasing financial education."
These non-traditional benefits offer workers a way to buy products and services through payroll deduction—in the same manner that they have been used to pay for insured benefits. These offerings, says Halkos, provide workers with immediate tangible benefits that they can use year-round, rather than traditional benefits that employees appreciate only when they are sick or hurt.
The benefits can include consumer product purchasing and service payment plans that employees can use at various stages of their life to meet diverse needs, she says. Purchase programs aren't new, but she predicts their value and importance will increase.
"With the average American continuing to experience financial stress, it can be difficult to purchase essential or life-enhancing household items. For several years, employee purchase programs focused on computers, electronics and home appliances, branching out in the past 12 to 18 months into furniture, home fitness equipment, auto, audio, barbecue, and baby gear. In 2013, we will see expansion beyond products into services."
Education may become one of the leading services, Halkos says. Employers are beginning to offer employees ways to fund online education classes, such as college courses, test preparation classes, tutoring and professional certifications.
"Giving employees a better, more affordable way to pay for education shows that a company truly values the future of their employees and their children," she says.
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.