Here are some unfortunate realities about the role of traditional health insurance in the United States.
Premiums paid for health insurance have consistently increased by more than 5% in recent years. The average deductible, as a percentage, of the American family income increased from 2.7% to 4.7% between 2008 and 2018. Together, premiums and deductibles comprised over 11% of median incomes in the United States in 2018.
For a sense of relativity, the famous “Rule of 28” is a financial wellness mantra that consumers should endeavor, traditionally, to spend up to 28% of their gross annual income on their mortgage payments. At this rate, within the next decade, American families could be spending half as much of that on health insurance before their health insurance company begins paying one dollar toward their health care.
As we have witnessed in many industries since the turn of the century, with enough respect and understanding of the status quo, technology can be a source of improvement for consumer health and financial wellness. Specifically, in this case, technology and innovation have provided all of us a fresh perspective around voluntary benefits.
Voluntary benefits - such as accident, critical illness, hospital indemnity, pet insurance, and to a lesser extent, identity theft protection - have emerged as ways to combat rising deductibles and put dollars back into consumers’ pockets.
Voluntary Benefits Go Beyond Helping Workers
Voluntary benefits help families protect themselves against unforeseen and even disastrous events – providing families with much needed financial support when they incur costly medical bills for these types of events. However, voluntary benefits go beyond just supporting the consumers. These benefits assist different players within the entire benefits ecosystem, including human resource professionals, brokers and insurance companies.
Although employee turnover has always been a challenge for those in HR, the pandemic brought unprecedented talent shortages, high turnover rates and low unemployment rates. And, contrary to what one might think, while the economy is opening back up, companies are still struggling to find talent. Voluntary benefits can be a way to retain and attract talent as they show employees that you value what they care about, such as their pets.
A recent BenefitFocus study found that employers could see a reduction in employee turnover of up to 8% -- and up to 24% for companies with a predominately millennial workforce -- when employees are enrolled in at least one of five benefit categories.
According to the Work Institute 2019 Retention Report, the cost of losing a worker is $15,000. With that in mind, an employer with more than 10,000 employees could save $1.2 million for every 10% increase in voluntary benefits participation, Benefitfocus said.
Impact For Insurance Companies
In many instances, these voluntary benefit plans can offset thousands of dollars of medical expenses – especially those that are a result of hospitalizations. Yet, in some instances, the promise and potential of voluntary benefits has largely gone underappreciated or even unnoticed.
Lack Of Education And Dynamism Has Led To Low Adoption
Many employers experience very low voluntary benefit participation, often because most employees don’t understand the relevance of voluntary benefits to their lives and their financial situations. Furthermore, since the products provide protection for when unforeseen events occur, it isn’t often that a consumer can appreciate the value of voluntary benefits. This lack of participation increases costs for those who do engage – while also reducing solutions for when unforeseen events occur.
Yet, we know the market can do better as a greater percentage of employees engage in disability, life and other types of insurance.
The use of AI-driven solutions can be used to demonstrate the value of these products, providing new opportunities to consumerize voluntary benefits as millennials and others have become used to personalization in different markets.
New Solutions That Organically Drive Participation
At last, as we look ahead to voluntary benefits engagement and participation, innovation has played a huge role in expanding the market. COVID-19 accelerate the speed of new technology across the entire market – making it easier for companies to better serve their employees.
This new market opens up new opportunities and data-driven solutions for HR leaders, consultants and insurance companies. Where they can now leverage value-added solutions, to help with proactive care management, broad-based discounts and claims assistance with major medical products – allowing voluntary benefit ecosystem players to provide services beyond moments of unforeseen incidents.
In doing so, HR leaders, consultants and insurance companies can drive greater participation, retention and affinity within consumer markets. The post-pandemic age of health care and insurance is approaching; in some ways, it will be unlike any era prior. Innovative players within the voluntary benefits space can redefine consumer experiences in ways that will drive greater adoption and appreciation from a market in need.
Sina Chehrazi is CEO and co-founder of Nayya. Sina may be contacted at [email protected].