As employers face multiple challenges in putting together their benefit packages, how do voluntary options fit into the mix? Findings from a recent LIMRA study point to several developing trends affecting benefit strategies. Advisors should know that most of these changes suggest continued support for employee-funded choices.
Employers do not envision making fundamental changes to their existing arrangements. Approximately seven in eight companies favor providing comprehensive benefit options to their workforce over a purely voluntary model. At the same time, 60 percent believe that employees must assume greater responsibility for their benefits.
Some have speculated that the passage of the Affordable Care Act (ACA) ultimately will result in fewer employers sponsoring insurance benefits. Although the full impact of health care reform is still largely unknown, nearly half of all companies expect their number of eligible employees to grow in the next three to five years. There also has not been large-scale migration toward using insurance exchanges or adopting a defined contribution benefits approach.
Many Benefits of “Voluntary”
Employers cite many reasons for offering voluntary benefits to their workforce. “No added cost to the company” remains the most common rationale (rated as “very important” by 75 percent of all sponsors). However, other factors clearly influence companies’ decisions. Roughly 70 percent use voluntary options to improve worker morale and/or attract and retain employees. The Great Recession made these considerations much less relevant in 2010. However, today’s reinvigorated labor market has quickly reminded employers how voluntary benefits can assist with their staffing efforts. As a result, sales of voluntary benefits have increased by an average of more than 5 percent each year since 2010.
A Paternalistic Approach
Companies appear to be placing more emphasis on protecting their workers with the options they offer. This may stem, in part, from companies perceiving that some employees simply can’t afford voluntary benefits. Guaranteed issue has become most important in plan selection (Table 1), suggesting that employers are looking for plans that appeal to the masses. Sponsors also show increasing concern with participation levels, and focus less often on saving money and advisor recommendations. Yet six in 10 employers believe that worksite professionals generally deliver on their promises.
Employees are concerned about carrier selection. Although employers do not directly pay for voluntary benefits, nine in 10 consider their overall value (i.e., the combination of price and product design) to be a critical consideration in vetting providers (Table 2). Plan design and cost are very important independently, but a balance of these two objectives truly enhances customer satisfaction. Employers also will switch carriers to secure a better deal for their workers. Although takeover activity has somewhat lessened over the past four years, this movement continues to be driven largely by price. Support options are also a vital consideration, with tools designed for employee use even more critical than those accessed by plan sponsors.
Employers remain committed to sponsoring benefits as they strive to protect their workforce. Rather than seeing employee-funded plans as cost-shifting mechanisms, they view voluntary options as a means to enhance their existing packages (especially as the competition for labor intensifies). Value is most essential in carrier selection.