Sales of voluntary products across the board will likely see a nice bump in 2015, as employers finalize their health care decisions and the War on Talent begins to heat back up.
“Employers have had time to recover from the recession, and they’ve analyzed how the [Patient Protection and Affordable Care Act] is going to impact them, so now they’re more willing to look at their overall benefit package,” says Bonnie Brazzell, vice president of Eastbridge Consulting Group Inc. in Avon, Connecticut.
Indeed, according to a recent Eastbridge survey, 14 percent of respondents said they were thinking about adding a new voluntary benefit. Moreover, 17 percent said they were thinking about moving some existing benefits to voluntary, and 12 percent said they were thinking of adding new partially employer-funded benefits.
“That’s exciting for brokers, as the doors are opening a little bit,” Brazzell says.
LIMRA experts “cautiously” see a lot of opportunity in the voluntary benefits marketplace, says Ron Neyer, assistant research director at LIMRA in Windsor, Connecticut. Approximately 15 percent of employers in a recent LIMRA study said they are either “very” or “extremely likely” to add a new voluntary benefit over next couple of years, and about 25 percent are “somewhat likely.” The percentage of employers who plan to replace an employer-paid or contributory benefit with a voluntary arrangement is lower — approximately 5 percent were “very” or “extremely likely” to, compared to 12 percent in 2010.
“We see that as a good thing, as employers seem a little less focused on cost-shifting than they did several years ago,” Neyer says. “As the job market becomes more competitive, employers become more mindful about how voluntary benefits can improve their ability to attract and retain employees and boost worker morale and job satisfaction.”
Another significant driver of increased interest in voluntary products is the advent of private exchanges, explains Craig Hasday, president of Frenkel Benefits in New York, which offers the Frenkel Benefits Marketplace exchange. More employers are moving toward online enrollment platforms that are considering defined contribution plans, which also enable them to add voluntary products.
“These platforms are PPACA-compliant and reduce the amount of administration burden that is being placed upon them,” Hasday says. “Private exchanges are starting to proliferate, particularly single-employer platforms that enable employers to preserve their risk pool, and that is really a springboard for voluntary products once the floodgate is open.”
Employers are starting to say they are “happy” to add prepaid legal plans, home and auto insurance plans, computer purchase deals via payroll deductions — “whatever might make employees more receptive over time,” he says.
“Having such products on exchanges gives employers and employees more flexibility when choosing benefits, and I think we’re finally going to gain significant traction,” Hasday says.
Here are some trends and products you should be watching this coming year.
Life and short-term disability insurance
Life insurance has been relatively flat over the past few years, but sales represent a much bigger base, making it more difficult to generate substantial growth, Neyer says. “Carriers have already reached a pretty good saturation point at the large-clients base, so they’re just keeping up at that level,” he says. Employers switching carriers represents a growing percentage of the new business written.
Short-term disability sales have been growing at a small clip for the past few years, but long -term disability sales have been “a little more choppy,” Neyer says. For 2015, “if recent history holds true,” an increase in new business is likely for both short-term and long-term disability.
Critical illness, accident, hospital indemnity and other medical supplemental plans
Life and short-term disability have historically been the most popular products, but the highest-growth product is critical illness, Brazzell says. Accident and hospital indemnity did not have as high growth, but she believes that’s “going to turn around,” as employees deal with higher out-of-pocket costs as they go into high-deductible medical plans.
“If Congress does allow for the ‘copper plan’ on the exchanges, with even higher deductibles in return for lower premiums, that will help the sales of voluntary gap-filling plans even more, but it’s too difficult to speculate whether or not that will pass,” Brazzell says.
Some companies were likely holding off adding some of these voluntary medical coverage products for most of last year due to health care reform, but sales were strong in the fourth quarter, and the momentum has continued into this year, Neyer says.
“It’s difficult to predict next year because of the looming employer mandate making things a little more uncertain,” he says. “But since it was supposed to go into effect last year, perhaps some employers have already planned [for it], leading to the recent surge in these supplemental products. I don’t see a decrease in the near future, but the climate can change quickly as health care reform requirements continue to unfold.”
While critical illness plans are gaining in popularity, life and disability are still the products most people buy, Hasday says.
Vision and dental
Vision products have also been growing by double-digits, but it’s a small base in total sales numbers — representing roughly 4 percent of 2013 new voluntary health business, so it’s easier to skew percentages, Neyer says.
Dental insurance is one of the top voluntary products sold by benefits brokers, and nearly a third of employers offer the products, according to Eastbridge. Next year’s sales should follow the same pattern, Brazzell says.
The big issue all over the country identity theft, which is “out of control” due to the amount of data breaches, says Doug Kleinsmith, president and chief executive officer of Legal Benefit Consultants Inc. in St. Cloud, Minnesota. The crime rings behind these breaches are more sophisticated today than they’ve ever been, and they understand how much easier it is to steal data than sell drugs.
“Today, employees are more likely to understand that they need some kind of protection from identity theft — and it doesn’t matter if they live in a large city of 2.5 million people or a small town of 25,000,” Kleinsmith says. “Target, Michaels and other big-box retailers that have suffered data breaches are located everywhere.”
The coverage his firm offers through Legal Shield/Kroll includes full restoration services from any type of ID theft. Legal services are also necessary in cases of ID theft when a victim is wrongfully arrested and thrown in jail for a crime the thief actually committed.
Another huge trend going into 2015 is the complexity of the U.S. legal system as it relates to PPACA. Businesses are continually confused about what they — and their employees — need to do to comply with PPACA. For example, employees are confused about their obligations to also cover their college-aged children if they are younger than 26.
“We have seen a huge uptick in legal services as employees seek attorneys to help employees with these questions and all types of life issues,” Kleinsmith says.
Some demographics can benefit nicely with legal plans, such as blue-collar middle-income workforces, but not very low-paid workforces or professional and executive high-income workforces, Hasday says. The most popular uses for legal plans are for home purchase closings and the drafting of wills.
Non-traditional voluntary products
Brokers are also increasingly selling non-traditional voluntary products, such as employee purchase programs via payroll deductions, voluntary wellness programs, discount health programs, vacation programs and pet insurance, Brazzell says.
“I think a lot of the time, when brokers write a case after life, disability and critical illness, they always need something new to talk to employers and employees about,” she says. That also spurs sales of other voluntary products they’ve been offering for years, such as legal plans. These alternative products help to differentiate brokers when trying to write new cases with employers.”
One employee-purchasing program is offered via Purchasing Power, which lets employees pay via payroll deduction for products from brands like Dell, Hewlett Packard, Canon, Sony, Panasonic, Samsung, Kenmore and Craftsman, says Elizabeth Halkos, chief revenue officer of Purchasing Power. Brokers get commissions when clients’ employees use the program.
“We’ve definitely seen a higher level of interest from both the broker and employer communities,” Halkos says. “Our offering caters to large, complex Fortune 500 organizations, ranging from a 1,000-employee hospital to a well-known 70,000-employee company. This also helps HR organizations, faced with reducing costs and administrative burdens a way to streamline their benefit offerings.”
Last year Purchasing Power launched education and travel product categories, as well as financial wellness content through partners.
“It’s more than financial literacy — it helps encourage positive financial behavior,” she says. “It’s a more affordable way for employees who don’t have access to credit cards at prime rates to purchase products, compared to borrowing from their 401(k) plans.”
The financial wellness offering is also good for employers because financial stress can affect an employee’s well-being and productivity, which can affect physical health and retention rates, Halkos says. The cost of health care has been found to be 46 percent higher for employees with high stress levels, and “the more evolved employers are looking at solutions to help with that problem.”
David Richman, a principal at David Richman Insurance Strategies LLC in Simsbury, Conn., has an employee purchasing program — with a twist — through Retail Benefits. Employees can earn cash back on purchases of more than 300 million products from more than 5,000 merchants.
“Employees get cash back, and it goes right into their account to pay premium expenses,” Richman says. Brokers get commissions from Retail Benefits when employees use the site.
Richman also offers his clients a variety of free voluntary products as “value-added” services, including RememberItNow.com, an online service that helps employees manage chronic diseases through mobile, patient-centric health care solutions.
“I just thought it was a wonderful thing to be able to educate people who were in this position or who have loved ones, either a disabled child or parents, that could use this free web-based program,” Richman says. “It allows people to input their prescriptions and then reminds them when they need to take their medications.”
Richman also offers clients a program called NeedyMeds.org, which gives discounts on prescriptions.
“These programs help brokers because it’s more than just selling insurance – it’s providing value-added services that can keep employees out of the emergency rooms,” he says. “It helps to strengthen relationships with clients because we are offering something that is not premium-based.”