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Employee Benefits Plans: Customization is Everything & Why the Popularity of Voluntary Benefits is on the Rise 9/23/2016

Voluntary Benefits

Michele Martin, Advisor, Voluntary Benefits

Once a cut-and-dried process for mid-size and large employers, structuring employee benefits plans has become increasingly complex in recent years. New legislation, including the passage of the Affordable Care Act (ACA) and the Labor Department’s expansion of overtime rules, combined with changing societal trends have placed pressure on businesses to innovate new employee benefits strategies to recruit and retain quality talent. As a result, organizations are adding any number of employee perks to their standard benefits offerings, from workplace wellness programs and onsite daycare services to telecommuting options and student loan repayment programs.

In addition, companies are expanding the types of standard employee benefits they provide to encompass newer forms of non-wage compensation that appeal to certain demographics. For example, pet insurance and identity theft coverage are attractive to Millennial workers, while Baby Boomers are more interested in pre-paid legal coverage or tax-advantaged 401(k) plans. Regardless of the industry, creating a well-defined employee benefits strategy is key to fostering employee satisfaction and commitment, and can benefit business growth by bringing the right talent on board and keeping them on the job.

Targeting the Right Outcomes

A vital step toward improving employee retention and maximizing productivity is to align employee benefits plan components to workers’ needs. This involves addressing both traditional employee benefits, such as life insurance, and short and long-term disability, as well as voluntary worksite benefits, like coverages for accidents, critical illness, and cancer. With major medical rates rising in the wake of the ACA, many employees cannot afford a low-deductible plan and are looking for ways to offset healthcare expenses. Although major medical is the second largest expense on the bottom line for businesses after payroll, many organizations now offer additional gap coverages to employees as a voluntary benefit.

While traditional employee benefits provide financial protection, voluntary plans can supplement or offset out-of-pocket expenses. For example, older employees are demonstrating interest in cancer insurance, since their risk of the disease increases with age. The employee’s major medical plan would cover the cost of care, such as chemotherapy or surgery, and a cancer policy would provide a lump sum payment to compensate for other expenditures, like purchasing a wig, flying in family members to help at home, or obtaining special equipment that is not paid for under the major policy.

Industry-Specific Solutions

Other strategies for customization revolve around the employer’s specific industry. For example, a manufacturing company with a production line will have a greater likelihood of employees being injured on the job than, say, a marketing company or accounting firm. That means production workers should have accident and short-term disability coverage in place, as well as term life insurance. The risk of getting hurt at work is top-of-mind, and any interruption in income means they can’t put food on the table for their families. Conversely, white collar employees generally are more interested in coverages like cancer and critical illness, since the likelihood of an accident or injury happening in the workplace is minimal.

In both scenarios, having in person presentations and support personnel available during the employee benefits enrollment period can greatly improve employee participation and ensure that workers are getting the right coverages for their needs. Although many employers are moving toward a self-service model that lets employees select their coverages through an online platform, this leaves employees at risk of being under-insured or choosing plans based on cost rather than suitability. For example, many employees don’t understand the difference between a medical PPO plan and a Healthcare Savings Account, or a single mother may not think that she can afford a term life policy, and end up placing her children at financial risk. A benefits counselor can sit down with an employee face-to-face to answer questions and guide them through the insurance maze for traditional as well as voluntary worksite coverages, helping ensure that they understand the value of each plan and select benefits options that provide sufficient protections.

More Healthcare Savings

Other attractive options to offset expenses for workers include offering a consumerism card and telemedicine services as employee perks. A consumerism card, or medical discount card, provides discounts on healthcare-related expenses, such as dental exams, eyeglasses, hearing aids, and prescriptions. Many programs also include access to a health advocate, who can help employees find medical providers and treatment options at a reduced cost, or clear up questions about a hospital bill, lab work, or other medical expense.

Similarly, providing access to a telemedicine service can help employees lower out-of-pocket medical costs and reduce missed time on the job. Through a telemedicine provider, an employee can have a virtual appointment with a licensed doctor or physician’s assistant via phone or video conference to explain their symptoms and receive a diagnosis and prescription, if needed. The service saves businesses and employees the hassle and expense of a worker taking time off to see a doctor for minor issues, such as a sinus infection or a child’s ear infection. The employee can pick up their medication from their local pharmacy when it’s convenient, and also have access to qualified medical experts around the clock without a costly trip to the emergency room.

Conclusion

Studies show that individuals often give as much consideration to the benefits package as to the salary when considering an offer from a prospective employer. Similarly, an existing employee is less likely to change employers if they already have a strong benefits package in place and feel that their employer cares about their safety, health and financial wellness. Offering voluntary employee benefits is a win-win for businesses and their workers, since employees can tailor a package to fit their needs, while employers can realize increased productivity and employee satisfaction.

Companies that offer customized benefits options should encourage their workers to look at their individual risk factors—such as their age, profession, family status, and financial goals—to pick the coverages that are best suited to their needs. Receiving benefits at the workplace provides employees a convenience that offers security and builds goodwill, since they don’t have to shop for coverages and often have access to valuable benefits with which they are unfamiliar. Offering the option to pay for coverages through a payroll deduction can be an additional bonus for both the employee and employer, because the employee can reduce their taxable wages, while the employer saves on payroll taxes. In short, adding voluntary benefits makes the employer look good and makes the benefit plan more robust, which goes a long way to protecting and retaining valued employees.


This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change.

Copyright © 2016 Marsh & McLennan Agency LLC. All rights reserved.

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