Employers are increasingly likely to offer voluntary benefits to help workers meet their financial needs and fill gaps in coverage, according to two benefits professionals who reviewed the hottest voluntary benefits for 2014 in a recent webinar. But as the costs of benefits shift to workers, employers have an obligation to help employees choose the best benefits.
“Ancillary benefits will be a greater differentiator [in 2014], more than ever before,” commented Thomas Mangan, CEO of United Benefit Advisors, during a webinar sponsored by Sun Life Financial and hosted by Employee Benefit Adviser. The trend toward voluntary benefits is being driven largely by the growth in high-deductible health plans and the resulting need for employees to cover health care expenses and protect their assets. “The more you have these large deductibles, the more you have to fill in the gaps,” said Mangan.
A range of ancillary employee benefits (both voluntary and employer paid) are fairly common in many benefit packages, according to a 2013 survey of employers by United Benefit Advisors. These include:
• Dental: 74% of employers provide dental coverage, and growth is likely in this area. The Affordable Care Act requires health plans to provide childhood dental coverage as an essential benefit starting in 2014. “So while three-quarters of employers are currently offering dental, 100% now need to offer it to children,” Mangan explained.
• Group term life insurance: 68% of all organizations offer group term life.
• Long-term disability insurance: 46% of employers offer this benefit option, which Mangan described as the most necessary benefit in a benefit package.
• Short-term disability insurance: 37% of organizations offer this product.
For companies mulling changes to their benefits packages, Mangan identified several benefits that few organizations offer but that could prove attractive to employees, including:
• Pet insurance: Less than 1% of employers offer it, but pet insurance is popular among employees. “It’s surprising how many people are picking pet insurance when they have that opportunity from a menu,” Mangan said.
• Identity-theft insurance: Less than 3% of employers offer it nationally.
• Membership discount programs: Only about 4% of all organizations offer employee-discount programs. “We’re really looking at a benefit that doesn’t cost a lot, but employers are not grasping it,” Mangan observed.
• Auto or home insurance. Less than 2% of all employers offer such insurance on a group platform. Mangan said this is an excellent venue, but it just hasn’t caught on among companies.
Dale Alexander, president of insurance brokerage Alexander & Co., pointed to other trending benefits:
• Flexible spending accounts: With recent changes to use-it-or-lose-it rules , employees can now carry over $500 annually. Alexander expects this will dramatically increase workers’ participation. “There’s almost no reason someone shouldn’t take a flexible spending account now.” (Note: Employees may not hold both an active health savings account and a health FSA, although the former may be combined with a "limit-scope" FSA for reimbursing vision and dental expenses.)
• Cancer, accident and critical-illness plans: “There’s a lot of talk out there [about offsetting] the cost of higher out-of-pocket health plans,” Alexander said. But considering the relatively low risk of serious accidents and illnesses, he’s not a big fan of these plans, observing that employees may be wiser to spend their dollars on more important needs.
• Gap/medical supplement plans: These plans can help cover doctor visits, deductibles and similar expenses, and they’re likely to become more important as employees enroll in more health plans with high out-of-pocket expenses, Alexander said.
• Employee assistance programs: “Employees are feeling more stressed today,” he said, so more employers are inquiring about assistance programs. And businesses might be able to save money on these programs if they’re built into other voluntary products, such as long-term disability and voluntary term life insurance. “Many carriers are loading an employee assistance program into those voluntary products, and most of them will allow all employees to have access to that employee assistance plan.”
A larger menu of benefits for employees to choose from means more responsibility for employers. “I think the enrollment experience for the employee has to improve,” Alexander said. “Now you’re going to have to teach how products work” -- how they will affect the financial lives of employees’ families, and, therefore, protect them from risks.
But that can be a tricky endeavor, Alexander pointed out, because most employees don’t really want more education. “You can’t cram it down their throat,” Mangan commented. And employees aren’t likely to remember plan details, anyway.
Instead, “Most people just want to know they’re doing the right thing.” To do that, focus first on desired employee outcomes, and then design benefits and enrollment accordingly.
Sometimes benefits professionals tend to look at the product first and just let the outcome happen. But the question should be, what do you want employees to focus on?
What if, Alexander said, you could put the best options into benefit plans and make those options the easiest ones for employees to choose? The design of the corporate 401(k), for example, drives successful outcomes, he said. The best 401(k) plans automatically enroll participants, set default contribution and escalation rates, and reallocate assets as participants age. “Make the easiest option very evident that that’s what they need to do,” Alexander emphasized.
“Be careful detaching from open enrollment,” he cautioned. “Stay involved with the enrollment. Manage the process. Define what is acceptable -- because it is about employee outcomes first.”
John Scorza is associate editor for HR Magazine.
© 2013, Society for Human Resource Management