Strengthen Your Benefit Package with Voluntary Benefits

According to Bankrate’s Financial Security Index, January 2019, 60% of Americans don’t have savings available to cover an unexpected $1,000 expense such as a deductible. The Kaiser Family Foundation/Health Research & Education Trust in their 2018 Employer Health Benefits Survey found that 58% of Americans with health insurance have a deductible of $1,000 or more.

Taken together, more than half of Americans have a $1,000 deductible and not enough savings to cover it in the event of an unforeseen injury or illness. That’s some scary stuff!

What’s even more shocking is that the 2019 American Journal of Public Health Report found that “66% of all U.S. bankruptcies are tied to medical issues” and that includes those who have health insurance.

So, how do we bridge that expense gap for employees without adding additional costs to employers? Many would say “voluntary benefits” is one, if not the only answer.

Voluntary benefits, also known as “ancillary or supplemental health benefits,” help prepare employees financially for out-of-pocket expenses due to accidents, illness, or injury. These benefits are 100% paid for by the employee and do not replace traditional medical insurance. In fact, they support the expense you incur when you use your medical insurance for treatment and services tied to illnesses and injuries.

These plans are offered by employers as a pre-tax or post-tax payroll-deducted benefit. When an employee files a claim, benefits are paid directly to the employee and can be used for whatever the employee chooses – replacement of lost income, deductibles, co-pays, rent, childcare, groceries, travel, vacation, etc.

Growing Demand for Voluntary Benefits from BOTH Employees and Employers

The demand for these benefits among employees has continued to rise. According to Randstad’s 2018 report, 66% of employees felt that benefits and perks were the largest determining factor in considering a job offer. Willis Tower Watson Employee and Employer Experience Survey 2018 reported that 78% of employees are more likely to stay with their employer because of their benefits program.

According to a 2021 BenefitFocus survey, at least 85% of employers offer some voluntary benefits. The same survey found that the average annual percentage of employers offering these income protection benefits has steadily increased every year since 2018. 94% of employers identify voluntary benefits as a key piece of their employee value proposition, according to a 2021 Willis Towers Watson Survey on the Emerging Trends in Health Care.

With the Great Resignation still raging on, if you’re NOT offering voluntary benefits, it’s more than likely hurting your employee recruitment and retention efforts in a real way.

Why are some employers not offering voluntary benefits to their employees? First, employers may have a preconceived notion that their employees can’t afford them or do not want them. Second, employers may be concerned with meeting minimum participation requirements. Third, employers may not want to increase the administrative burden on their HR and accounts payable staff.

What’s more convincing than the reasons not to offer these benefits are the reasons for offering them! Enhancing your benefits package can actually save your organization money. With employee-paid, tax savings-generated programs, you can offer more affordable, higher deductible health plans while reducing turnover costs – which can be as high as 60% of an employee’s salary!

What Types of Voluntary Benefits Should You Offer?

Voluntary benefits enable you, the employer, to meet the needs of every employee at any age or phase of life, by providing options that meet employees where they are through savings, choice, and flexibility. Start by looking at your workforce demographics. The benefit that stands out to your Gen Z employee may be different from what your Baby Boomer employee values.

Some of the popular voluntary benefits that appeal to all demographics include:

• • Disability Insurance

    – 7 in 10 employed Americans would feel the financial pinch in a month or less without their paycheck, and 1 in 4 would feel the pinch immediately. Source: What Do You Know About Disability Insurance? Life Happens Survey, 2018. Disability insurance is essentially insurance for your paycheck. This benefit can pay an employee directly up to 66 2/3% of monthly income after an elimination period if they are unable to work due to off-job sickness or injury.

 

• • Accident Insurance

    – 1 in 5 adults had major, unexpected medical bills to pay in the prior year. Source: Federal Reserve “Report on the Economic Well-Being of U.S. Households in 2018”. Accidents are unpredictable! This insurance pays an employee a set amount of cash benefits based on treatment received for injuries sustained in a covered accident and encourages your employees to seek immediate medical treatment for their injuries. The no treatment or expenses = no benefits rule has been shown to reduce work comp claims!

 

• • Critical Illness and Cancer Insurance

    – This insurance pays a lump sum post-tax cash benefit upon diagnosis of a covered common, critical illness including cancer – in some cases as much as $30,000. No crazy treatment or hospitalization is required. Covered illnesses can include heart attack, stroke, invasive cancer, blindness, paralysis, major organ failure, coma, even childhood conditions, and infectious diseases such as COVID-19.

 

• • Hospital Indemnity Insurance

    – Hospital indemnity insurance pays cash benefits directly to the employee for hospital admission and confinement due to a covered injury or illness. There are no networks. Employees can go to any hospital, and see any doctor. This plan should be designed to support deductible options in a meaningful way.

 

• • Life Insurance and Accidental Death & Dismemberment

    – Life insurance pays a lump sum cash benefit to a beneficiary(s) upon an insured’s death due to injury, illness, or natural causes, and an accelerated benefit if an insured is diagnosed with a terminal illness. Both life insurance and the following insurance offer financial security for the surviving family, the ability to pay for current and final expenses, ongoing expenses such as a debt, mortgage, childcare, and future expenses such as child education and retirement. A good rule of thumb for determining the appropriate coverage amount is 10X employee salary.

  • Accidental Death and Dismemberment

    – This insurance offers much less protection than life insurance, which covers most causes of death because it only pays a lump sum cash benefit to a beneficiary(s) in the event the insured dies or is dismembered in a covered accident.

  • Pet Insurance

    – Health insurance for your employee’s furry friend affords an employee financial protection in the case of accident and/or illness. Some plans work just like your own health insurance, except they’re customizable. Pick your deductible and co-insurance. The premium is based on your selection, as well as the breed, age, and location of your pet.

The benefits described above are just a few of the many voluntary benefit varieties available in the marketplace. For more information on these benefits and how they can enhance your organization’s benefits package, feel free to reach out! Our voluntary benefits contracts include:

• Customized Plan Options
• Competitive Pricing
• Portability Included
• Preferred Underwriting
• Enrollment Support
• Technology-Friendly

About VSMG

Built by and for Arizona public sector employers, VSMG is a leading employee benefits consultant dedicated exclusively to serving Arizona school districts, municipalities and other public entities for over 19 years. With offices in Phoenix and Tucson, we are committed to delivering expert advice, best-in-class benefi­ts, forward-thinking strategies, and cost-effective solutions to help our school district clients attract and retain their talent. For more information on how we can help your organization at no cost, don’t hesitate to reach out. Call (623) 594-4370 or visit our website.