The employee benefits industry has long played a vital role in the financial security of U.S. consumers through insurance benefits sold in the workplace. However, the benefits industry, like every other system, is not immune to change. LIMRA surveys have identified three emerging trends that are likely to have an impact on this market well into the future. Let’s take a look at each one.
The rising cost of benefits is becoming an urgent issue for many companies. Employers rate controlling the costs of health insurance, their overall benefits package and compensation as the top three critical issues that their companies are facing. Not surprisingly, medical costs are the primary driver behind employers’ concerns.
As costs continue to rise, employers are searching for ways to reduce expenses. They are exploring a variety of benefit funding changes, although most are not expecting to shift all benefits to a voluntary basis. Some are also investigating private exchanges, hoping that increased competition will place downward pressure on prices. In addition, employers are looking at their benefit plan design as a way to keep expenses down. Among those employers considering plan design changes in the next two years, most of their intended changes involve cost reduction, such as reducing benefit levels, replacing current plans with less expensive ones and increasing cost-sharing for employees.
Going forward, the desire for simplification is likely to play a major role in many facets of employee benefit sales. Businesses are continuously trying to accomplish more with less. This trend extends to human resource (HR) departments, where many HR professionals likely find that they have less time to manage increasingly complex benefits products. As a result, many employers express a strong desire for simplicity in their benefit plan design and administration.
This preference is particularly evident when it comes to voluntary products. Companies looking to add a new voluntary benefit place a high importance on product features that simplify administration. These features include the benefit being guaranteed issue, requiring a minimum number of disclosure and enrollment forms, and allowing the same communication messages to be used for all employees. Employers also look for simplicity when selecting a voluntary enrollment technology system. They prefer a platform that is easy to use and navigate and that allows enrollment in all benefits through the same system. Employers place less importance on extra customizable features such as reporting capabilities or communication add-ons.
Streamlined Communication and Enrollment
Employers also prefer simplicity in their approach to communicating with employees about benefits, since they often have limited time available to devote to this task. LIMRA surveys show that a large majority (81 percent) of employers admit they always use the same benefit communication strategies for all employees, even though nearly half feel that, ideally, different communication methods should be used for different employee populations. In addition, 49 percent of employers limit benefit communications to open enrollment periods rather than continuing the process throughout the year.
Employers also seek to streamline the enrollment process by holding open enrollment for voluntary and employer-paid benefits at the same time. This practice presents particular challenges for voluntary and worksite carriers, compelling them to compete with medical benefits for employees’ already limited attention and wallet share. In addition, the majority of companies allow employees to self-enroll in voluntary benefits, even though this is not likely to be the best method for achieving high employee participation.
Implications Going Forward
To succeed in this challenging environment, benefits carriers will need to adapt to the changing needs of their customers. As employers strive to do more with less, the benefits industry can help by developing benefit solutions that are easier to administer and more flexible in terms of cost. They also can provide greater support to employers during the enrollment process, such as by helping create the content for benefits communications and providing more convenient enrollment methods. Above all, it is essential for carriers to maintain active lines of communication with their customers in order to track these evolving needs and provide customized solutions.