From the July/August 2011 issue of Treasury & Risk magazine

More Protection, at a Price

More companies bulk up their benefits packages with offerings that are paid for by employees, but use group buying power.

UmbrellasThe rising cost of employee benefits is fueling growth in voluntary benefits—those offered by the company, but paid for entirely by employees, often through payroll deductions.

“Voluntary benefits allow employers to offer a more robust benefits package without necessarily incurring more cost,” says Bonnie Brazzell, vice president at Eastbridge Consulting Group. Such benefits range from supplemental life insurance and critical illness and accident policies to pet coverage.

Eastbridge data show that among U.S. companies with 10 or more employees, 66% offered at least one voluntary benefit in 2009, up from 54% in 2006; among companies with more than 2,000 workers, the portion was 87%.

Chris Covill, the national specialty practice leader at HR consultancy Mercer and head of its integrated benefits initiative, says some voluntary benefits, like auto or pet insurance, use group buying power to help employees get lower premiums than they would otherwise.

Other offerings, like critical illness and accident policies, help workers offset gaps in their core health and life insurance coverage, such as deductibles, and Covill says these benefits are generating the biggest increase in demand. “Employees are more focused on being good individual risk managers,” he says.

“In the last few years, the buzzword has become consumer-driven benefits,” says Neicee Durrence, vice president of acquisition strategies at Unum, an insurer that provides a range of voluntary benefits. “Consumers are being asked to fund a greater percentage of their overall benefits package and also make decisions around which products are best for them.”

Durrence says the most rapid growth is in critical illness and accident plans. “Healthcare reform is really the driver,” she says, and predicts that interest in voluntary benefits will surge as more reforms take effect.

Covill likens the current situation in employee health coverage to the shift from defined-benefit to defined-contribution retirement plans and says healthcare reform will reinforce that evolution. Analysts expect healthcare reform to boost employees’ deductibles or out-of-pocket costs, he says, and employees will look to fill those gaps with voluntary benefits.

Employers used to offer voluntary benefits separately from their regular benefits package, but Covill says these days more companies are integrating voluntary and core benefits, using the same technology platform and communications to enroll employees in both. Combining the two types of benefits provides some efficiencies for employers, Covill notes, and may also get them a better deal from their carriers.

 

For a look at a new model for providing health insurance Aon Hewitt is rolling out for corporate customers, see Early Health Exchange.

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