Voluntary Benefits: Why Voluntary Benefits are so Important

People have asked about voluntary benefits for years. The questions have come in various forms, ultimately from a position of curiosity: “what are voluntary benefits or VB”, or “why are voluntary benefits so important”, others just want to understand “how to get quotes and implement voluntary benefits”. This article is positioned more as a statement of “why voluntary benefits are so important”. The answer will be revealed after they are defined; finally we will explore how they are implemented.

What are Voluntary Benefits?

The term “Voluntary Benefits” stems largely from the fact that employers want to disassociate certain benefits from core or company sponsored ERISA benefits. Employers have allowed insurance companies to offer individually owned and employee funded policies through payroll deduction as a convenience to employees.

Examples of traditional voluntary benefits:

• Short Term Disability

• Long Term Disability

• Long Term Care

• Permanent Life

• Critical Illness

• Cancer

• Accident

• Hospital Indemnity

Initially these policies or benefits were only made available to employees on a “voluntary” basis. Meaning, there was no responsibility on the employer’s part to force employees to hear about the benefits and no contributions from the employer.

These voluntary benefits are growing in popularity, so employers are finding themselves in negotiation with carriers and advocating for employees at claim time. Many of the benefits could be pre-taxed as well, which further confirms they are company sponsored benefits. Any of the above actions could disqualify sponsoring employers from claiming the voluntary benefit ERISA safe harbor. Thus, many large employers are now treating traditional voluntary benefits as ERISA company sponsored benefits.

Most of the traditional voluntary benefits have more recently been referred to as supplemental, ancillary, enhanced or financial benefits. There are other voluntary benefits such as legal, identity theft pet insurance that will likely remain categorized ref as voluntary benefits.

Why offer Voluntary Benefits?

There are many reasons employer would want to make voluntary benefits available to their employees. There are advantages to the employer, employee, broker or consultant and obviously to the insurance company. You might wonder why the insurance company was included in this list, but we will get to that later in this article. The primary reasons employers should offer voluntary benefits have been organized into three categories:

1. Voluntary Benefits are Good for Employees. Most of the traditional voluntary benefits mentioned in this article were designed to provide financial protection for employees and their families. Major medical or health insurance was designed primarily to cover the doctor or provider, facility and drug costs; it was never designed to cover all medical expenses. Employees must cover deductibles, coinsurance and other expenses not covered by insurance. Voluntary benefits serve as a financial safety net that is available for employees in case of a serious illness or injury. Employees typically can obtain guaranteed issue coverage with no health underwriting questions and sometimes the policies have no pre-existing conditions clause. Many employers feel employees live “paycheck-to-paycheck” and can not afford additional benefits. Unfortunately, most employees could not survive financially if they were required to come up with deductibles, co-insurance or significant out-of-pocket expenses. As a matter of fact, the majority of bankruptcies in the United States have been caused by medical expenses and the majority of those people had health insurance.

1. Voluntary Benefits are Good for Employers. Many employers are in a competitive job market and finding top talent can be difficult. When employers market and expand their benefits package with voluntary benefits, it gives employees an increased perception of value which equates to better morale and retention. A well organized and promoted voluntary employee benefits package will not only impact employees, it can boost perception of that employer in their respective market. Voluntary benefits can also impact employee productivity and not just from an employee morale standpoint. Financial stress has been proven to lead to mental and physical stress, which leads to absenteeism. Long-term, this stress leads to more health issues and claims that cost the plan and employer money. Companies offering first dollar off-the-job disability insurance and accident coverage, have been found to experience a reduction in workers or workmens comp claims. Employees are less likely to delay seeing a physician, when they know the majority of their expenses are going to be covered. The best part is that employers can implement voluntary benefits at no direct cost to the company.

1. Voluntary Benefits are Good for Brokers and Consultants. Expanding the number of benefits offered to employees allows the broker or consultant to generate additional revenue and further align themselves with the employer’s objectives. The insurance company’s motivation to implement more voluntary benefit cases can be leveraged by the broker or consultant to bring the employer and employees more value. Many times the rates on stop loss insurance or other company paid benefits can be held or sometimes discounted. Insurance companies will also pay for services such as benefit communications, wellness programs, enrollment services or benefits technology. Most qualified and experienced third party service providers or vendors will partner with the broker or consultant, versus going direct to the employer. These relationships are ideal as the broker or consultant should not be in direct competition with a vendor. Agents and carriers that go direct to the employer sometimes offer conflicting products which could be creating confusion or even employer penalties.

How to Implement Voluntary Benefits

First, it is important to establish whether the employer prefers product value or ease of administration. For employers that prefer ease of administration, they should select one or two carriers at the most. Each carrier is going to have enrollment and billing requirements, so it can get complicated for employers that do not have benefits expertise or the staff to focus on administering the employee benefit programs. If the employer prefers the very best value, it will almost always require relationships with multiple insurance carriers and the need for consolidated enrollment technology. Using multiple insurance carriers allows the employer to leverage multiple insurance carrier relationships and ensures the very best value for employees.

There are a few more simple yet important steps to implementing voluntary benefits:

• Determine organizational goals or key initiatives

• Analyze existing benefits

• Identify insurance products that should be quoted

• Identify benefit services that could be provided by carriers or vendors

• Identify the best solution for your organization

• Communicate the new benefits to all employees as a complement to core benefits

• Enroll all employees either accepting or declining the voluntary benefits

Engaging a consultant or an experienced voluntary benefits professional to assist with this process will usually provide additional insights and the best possible solution for your organization.

Summary

Whether you are implementing voluntary employee benefits for the first time or have years of experience, these benefits are a vital component of any organization’s benefits package. They help attract and retain talented employees, yet have no direct cost to the employer. Evaluating where your company stands in your market with competitors and employee is an important next step.

For more information or questions, contact:

George Williams, President of BOST Integrated Solutions, Inc.

bostintegrated.com or gwilliams@bostbenefits.com