VOLUNTARY BENEFITS: INTO THE MAINSTREAM [Rough Notes]

Studies identify changes in employee attitudes; opportunities for brokers in competitive market

Historically, one of the primary purposes of employee benefits has been to recruit, retain and reward employees. However, the recession and the resulting difficult employment market have changed the traditional role of this powerful HR tool.

Because of the problems in the economy as well as the rapidly escalating costs of traditional benefit programs, employers are being forced to pass more of those costs on to employees. Whether it is through increased deductibles and co-pays, higher pre miums, reduced limits, or some combination of all of them, employees are now shouldering more of the financial burden of traditional benefit programs.

In many cases, this is, causing a change in the overall value of these benefits in the minds of some employees. Consequently, employers are struggling to find ways of providing benefits that will not add to their costs. Many of these employers think that voluntary benefits may hold the key. As a result, in some cases, the "traditional benefit package" is beginning to evolve into a comprehensive suite of benefits that includes those that can be provided at little or no cost to employers and still deliver high value to employees. So, while prevoluntary benefits are nothing new, today they are becoming a staple in many companies' HR arsenals.

Employee observations

Eastbridge Consulting Group, Inc., a consulting group specializing in worksite benefits, has completed several surveys that should be of interest to anyone involved in the employee benefit arena. One of the first and most important findings from its surveys is that employees still look to their employers for the lion's share of their insurance protection.

A recent study has confirmed what many have long suspected: "Only 23% of employees said they owned insurance (other than auto and homeowners) outside the workplace." As has been the case for some time, employees have identified medical and prescription drug insurance as their most important employerpaid employee benefit. Rounding out the top four coverages are dental insurance and vision insurance. The study goes on to note that other insurance coverage "has taken a step back in importance."

Frequently, voluntary benefits are viewed as a "win/win" situation. They allow employers to broaden the coverages that they offer to their workers, without adding to the corporation's costs.

For their part, employees are able to purchase needed coverage at more competitive rates than if they had to buy it on their own. Many employees indicate that they perceive voluntary benefits to be extremely valuable and, in some cases, expected.

View from the broker's side of the table

Clearly, the recent environment of reform that is sweeping across the health care industry, including health insurers, has left many benefit consultants, agents and brokers concerned about their future. All of the emphasis on cost reduction strategies has left many participants trying to determine the most appropriate method for marketing their products and services. While the unsettling nature of the current market does represent a certain amount of risk, it also can provide opportunities for those agents and brokers that can take advantage of the rapidly changing landscape.

One of the over-riding trends that has been identified by many industry experts is the merging of the traditional employee benefits brokers/ agents and the voluntary market brokers/ agents. While most of the benefits brokers/agents traditionally have maintained their distance from voluntary market products, times are changing. Increased competition is wiping out any long-standing boundaries that may remain. According to Eastbridge Consulting Group's "2010 Evolution of the Worksite Broker - Spotlight Report," over 90% of traditional brokers have begun to sell voluntary plans. Additionally, over 68% of "worksite"/voluntary agents and brokers are also marketing employer-paid products and services.

Aflac has provided brokers with a wealth of information to help brokers understand the changing market and has identified five trends that will influence the voluntary market:

* Shifting, but vital role of brokers and agents. Many sales personnel have expressed concern about their continuing role in the new "dawn of health care." A recent study by Aflac, however, has some good news for worksite agents and brokers. The study has found that "many HR decision-makers and their workforces will rely on brokers and agents to help navigate the growing complexity of health insurance." Education of the customer (both employer and employee) will become paramount.

* Disruptive market trends lead to innovative business models. While pointing out the obvious, Aflac says, "Agents and brokers in the voluntary benefits business will need to start getting creative." Continued interest by employees in voluntary benefits will impact the entire benefit community. This environment will lead to major changes and further blurring of the lines between traditional employee benefits and voluntary benefits.

* Leveraging technology to enhance sales and improve service delivery. For the past few years, many benefits executives have wondered if the "relationship between digital technologies and insurance is marriage material." Most agents and brokers indicate that selling employee health insurance is grounded in establishing personal relationships, but they also believe that "technology can improve business processes and thus impact the sales and enrollment process."

* Wellness initiatives will be crucial, if employees use them. Wellness has become and will continue to be the "game changer" in the benefits arena and, according to Aflac "will be an increasing focus for employers in 2011 and beyond." Further, they note that despite many new provisions within the recent health legislation, "the old challenge of incentivizing workers to take advantage of preventive measures still exists." One of the greatest opportunities for agents and brokers is helping their customers find new and creative methods to increase employee participation. Without question, this will require "turning the attention towards the incentive component of preventive health care programs."

* Your clients' benefits packages will become an even greater differentiator. Recent changes within the health insurance industry assure that coverage "will become more homogenous than it is today." As a result, there will be significant opportunities available to employers that can "distinguish themselves as an 'employer of choice' by offering a more comprehensive benefits program than most." This will require a carefully crafted program that reflects input from both the employer and the agent/broker and includes a number of voluntary insurance coverage options that will best suit the employees needs.

As can be observed from the list above, while there currently is uncertainty in the employee benefit market, it will undoubtedly improve as the general economic market recovers.

Conclusion

The voluntary, aka "worksite," benefit market has seen significant change due in large part to the worldwide recession. Nevertheless, several recent studies indicate that this market segment will be drawing increasing interest from employees. Over the last few years, traditional benefit agents and brokers have become more involved in selling worksite benefit programs. Recent studies show that as many as 90% of traditional benefit brokers are active in the voluntary market. Consequently, many of the differences between traditional benefits agents and brokers and voluntary benefit marketers are being eliminated. This blended benefit approach is certain to continue in the short run, and agents/brokers who understand this shift will be better able to take advantage of new opportunities that arise.

While there is still much disarray within the overall benefit market, those agents and brokers that can move to a more consultative approach stand to reap significant rewards. Educating the customer, whether it is employer or employee, will be the quickest way to capitalize on the new opportunities that present themselves. Bottom line, agents and brokers that understand the broader view of employee benefits will be in the best position to take advantage of this changing landscape.

Many employees indicate that they perceive voluntary benefits to be extremely valuable and, in some cases, expected.

By Michael J. Moody, MBA, ARM