Voluntary Benefits - Employee Vacation Savings Benefit Program

Maximizing the value of benefits in a recession In light of current economic conditions, many employers have had to consider, or even implement cutbacks in the benefits offered to their employees. Not all reward changes have to be a negative. In this article, we look at ways in which employers can motivate their workforce without having to spend a lot of cash. Cash no longer flows as freely as it once did, and employers are responding. Many employers have cut back on funding retirement plans and other benefits. Many employers have cut back on staffing levels. Many employers have cut back on both. However, all employers want to come out of this recession ahead of their competition. History indicates that a workforce focused on achieving the next goal, rather than dodging the ax, will help an employer win. This puts pressure on human resource managers in the classic dilemma of keeping morale high while cutting employee security. Fortunately, most people value more than just cash and have the ability to do so in the workplace just as well as other parts of their life. Tapping into those values offers a source of low cost morale raisers. In this article, we outline a few ideas for motivating a workforce without a large outlay of cash. Teamwork works Focusing your workforce on company goals not only increases the efficiency of your productive effort, but can also improve morale. Employees can figure out how or why they are on the winning team, increasing their sense of security. And to the extent they participate in that success, employees often develop a sense of job satisfaction. Holding a contest to see who can generate the best idea for improving profitability gives your workforce the opportunity to give their input, participate in the process, and be rewarded. The company pays for the cost of organizing the contest and whatever prize incentive is offered. The contest may stretch firm-wide or vary by unit. And if all works out well, the company will profit from the endeavor. Offering opportunities for employees to invest in the company could also unite employees in the interest of making the company profitable. This familiar technique can be offered for the relatively low cost of equity dilution, but may have a more beneficial result. Less aligned with company profit but still a good team building tool, group charity efforts draw on employees’ sense of values. In this time, employees probably have a heightened sense of their fortune, considering their employment, and contributing to their community allows them to feel like the community will be there for them should they experience a time of need. While employees may not have cash to contribute, they may be willing to contribute time, especially if their employer is willing to allow some time for them to participate. Career guidance Given the severity of this recession, many companies are reconsidering the direction of their business. Necessarily, this involves retooling their workforce. Promising employees may see opportunity in changing with the company. So, for the maximum cost of retraining such employees, the company gains the option of preserving valued human and intellectual capital and does not have to take the risk of bringing unknown workers on board. In order to bring about this effect, companies must first illuminate the possibilities. At the basic level, this ensures that all employees are striving for the right goals. But it also ensures that an employee who sees a potential business opportunity will consider developing it at their current firm rather than starting their own firm or jumping to a competitor. Employers have several low cost options for assisting employees with the transition to a new business direction. To the extent an educational assistance program already exists, the employer can refine it to motivate appropriate development. This may involve additional help in critical development areas or restricting assistance to where the company has a need. The company may offer employees opportunities to learn new skills on the job, by splitting responsibilities between old and new endeavors or by offering internships in the new field. Finally, the company may support the employee in attending professional seminars or networking events that allow the employee to pick up new skills and learn about the new line of business they are helping to develop. Give them a break A job represents only a portion of a worker’s life. Lifestyle benefits, by definition, make it easier for workers to integrate their jobs with the rest of their lives. Depending on the job and lifestyle benefit, the cost of such a benefit may run as low as a bit of administrative difficulty. However, the return on such benefits may include more refreshed employees, less absenteeism, lower office maintenance costs, and more interesting, vital employees. Traditional lifestyle benefits include paid time off, less formal dress requirements, flexible work schedules, and remote access to work. In the last six months, some employers have begun to consider compressed work weeks, which have benefits similar to remote access and paid time off. Employees have one less day to commute and one more day with their families and friends. Particularly where employers can arrange to close a location for the day, the company may save on energy and other office maintenance costs. An employer might also experiment with allowing partial or unpaid time off, to smooth rapid fluctuations in their need for labor. Suppose, for example, that an employee has a cyclical work pattern which has slowed for a week or two. Without the option of taking off at lower pay, an employee may come in, take space and resources, burden his or her manager with a search for something to keep the employee busy, etc. With the option, such employees may decide they would rather spend the additional time taking a vacation, working around the house, or perhaps even learning new skills that could be applied at their job when they are needed more. A company might also offer a number of ways for employees to save money, without actually spending much of its own cash. Naturally, this includes discounts on its products. Offering employees first crack at purchasing old office equipment or furnishings may reduce the cost of disposing of such materials. The company may be able to use its size or position in a community to negotiate discounts for employees at local businesses, like restaurants, cleaners, and health clubs. The latter brings with it the ability to tie in the company’s wellness program, making it easier for employees to maintain a healthy lifestyle while employed. Make the most of what you have Many of the opportunities listed above probably already exist at your company. However, for various reasons, your company may not be getting as much value out of them as it could. Our final suggestion would be to make the most of whatever benefits you offer by ensuring that your employees know about them and how to make use of them. Raising awareness of existing benefits applies to any program, not just the ones listed above. Employee Assistance Programs (EAPs) are a good example of a benefit that commonly go unnoticed but may have usefulness in today’s environment. Employees may use such programs to cope with the stresses of today’s economic environment or figure out that they want to exploit new opportunities presented by a change in their business. Employers have long lamented the lack of recognition that their defined benefit programs get. But the current market environment provides an outstanding opportunity to show how valuable the pension promise is to an employee’s retirement portfolio. When the pension benefit is added to an employee’s retirement income picture, the drop in defined contribution accounts are less (but still) significant, especially for those near retirement. Even frozen defined benefit plans have value – perhaps more so at this time since they may be overlooked by employer and employee. The key to making the most of the benefits you already have could lie in an effective communications campaign. Communicating not only what the benefit is, but how employees might find it useful in the current economic climate may build as much goodwill as offering a whole new benefit. It also helps to ensure that you are getting as much value as you can for the benefit dollars you spend. * * * Employers have the ability to gain some value from benefits without spending a lot of cash. By stepping back to observe what employees value and what resources already exist, managers can put together a program appropriate for the current economic environment and aligned with the company’s direction. While some employers may be satisfied to keep their workforce feeling like they are lucky to have a job, others may try to include their workforce in their comeback from the recession. The idea for this article came from questions our clients asked us. We believe there are many more ideas out there, and would like to help all of our readers benefit from sharing them. If you would like to contribute to the discussion, we invite you to submit your own ideas for benefits that do not strain cash flow. What have you done to improve morale over the last year? If we receive enough submissions, the responses will be published in the form of another article. All contributors will remain anonymous. After being hospitalized for depression, the employee in this case asked her employer to complete her application for short-term disability benefits. Instead, the employer terminated the employee and told her that it was not required to complete the application. The employee sued the employer for state-law claims of breach of contract and wrongful termination, but the employer argued that the short-term disability plan was subject to ERISA and that the employee’s state-law claims were, therefore, preempted. The employee and employer disputed whether the plan satisfied the requirements of the DOL’s regulatory exemption for certain voluntary insurance arrangements (the “voluntary plan safe harbor”). Agreeing with the employer, the court held that the plan fell outside the voluntary plan safe harbor and was, therefore, subject to ERISA. The court concluded that the employer exercised “substantial control and direction” over the disability plan’s design, because, among other things, the employer determined the plan’s eligibility requirements by directing that employees work full-time, be actively at work, and complete 60 days of continuous service to be eligible. The court also noted that coverage under the plan ended following conclusion of an employee’s employment with the employer, and that the employer had amended the plan to exclude coverage for certain events, including marriage, divorce, death, and birth. Furthermore, the court observed that the employer played a significant role in administering the plan, which included (1) explaining and offering the plan to its employees through an employee orientation video, (2) coordinating the filing of claims and facilitating appeals, (3) collecting missed deductions and reconciling payroll deductions for employees who elected coverage, and (4) establishing minimum benefit levels and maximum monthly payments. As a small-business owner confronting the realities of a sagging economy, Steve Roper knew he had to cut costs someplace, and employee benefits were a logical target. But he was loathe to roll back coverage without giving his employees something substantial in return--a carrot to keep his core staffers content in their jobs, and one that might even add perceived value to their benefits packages at little to no extra cost to his company. That's when Roper, himself a veteran workplace benefits broker and the owner of Roper Insurance & Financial Services in Denver, decided it was time to offer his employees voluntary benefits. Now, he says, more small business owners are following suit. "Lots of small companies are saving money by increasing deductibles on their health-care plans and offering voluntary benefits to bridge the gap." Difficult economic times mean tough either/or choices for small-business owners. For many, adding voluntary benefits to compensate for cutbacks elsewhere in a benefits package or to enrich an existing core benefits plan--particularly one with a high deductible--makes more sense than making cuts in critical areas of a business, laying off key employees or losing them to a competitor with a richer benefits package. Instead of paying for disability insurance, life insurance, dental insurance and the like as core employee benefits, small-business owners have begun to see the wisdom of providing those kinds of benefits on a voluntary basis, a la carte-style, where employees can pick and choose among them and pay for the ones they want and can afford. Not only does offering voluntary benefits cost small employers virtually nothing and help level the benefits playing field with larger companies, it also affords employees access to various types of insurance coverage, typically with looser underwriting requirements and at group rates that are "lower than if they went out and got coverage on their own," points out Bernard DiFiore, president of BenefitMall, a Texas-based benefits wholesaler. This cost-conscious mind-set, heightened by the economic tailspin, has triggered a pronounced shift among employers from core to voluntary benefits, says John Roberts, president and CEO of Assurant Employee Benefits, which works primarily with small and mid-size companies. After a 30 percent surge in the fourth quarter of 2008, voluntary benefits now represent a one-third share of new premiums sold by the company, up from a one-quarter share a year ago. It may not be long, he adds, before that share swells to one-half. Small businesses can use voluntary benefits as a magnet to draw and keep quality talent, says Debbie Stocks, principal at Your Benefits Partner, a brokerage in Glen Allen, Va. "Employers can say, 'As my employee, you can get this coverage, and get it guaranteed-issue, at a lower premium.' There is an advantage in that." "A lot of companies have cut back their staffs, and they're down to the core group of people that are going get them through [the recession]," Roberts adds, "so they want to make sure that group of people is happy. Adding new [voluntary] benefits is a way to do that." The challenge for small-business owners is figuring out which voluntary benefits to offer. "People are most interested in benefits they can see themselves using," Roberts says. "You dont want to try to sell employees on benefits that will cost them a lot of money. People are not compelled to spend a lot of extra money right now." The first two voluntary benefits that Roper offered his employees were disability insurance and life insurance. Heres a closer look at the voluntary products that experts say are most popular and provide the most bang for the employee buck: Because it provides protection against lost income, disability insurance (short- and long-term) is perhaps the most popular voluntary benefit nowadays, Roberts says. "Instead of paying $100 a month for a lot of piece parts, like accident and hospital insurance, employees can pay, say, $30 a month for group disability and another $20 a month for group life insurance and still have $50 in their pockets," Stocks says. The financial security afforded by life insurance makes it an especially popular voluntary benefit in uncertain economic times. While term life is still most prevalent, a "flight to quality" among employers and employees is making permanent life insurance (such as universal life) more popular, Roper says. Voluntary dental insurance also holds great appeal for employees because, Roberts says, "you can design it so it's not very expensive." Relatively new among voluntary benefits, supplemental limited-benefit plans that provide a set dollar amount per day (typically $500 or $1,000) for hospital stays are gaining popularity, DiFiore says, as are gap insurance policies that pay a certain amount up to a deductible. More targeted in their coverage but also appealing, especially to small businesses with high-deductible plans, are supplemental accident insurance and critical illness insurance, says Melanie Barnard, an employee benefits consultant with GCG Financial in Greenwood Village, Colo. Shopping list in hand, it's time to start assembling a voluntary benefits package. First order of business: Find a benefits broker who is objective, knowledgeable about the nuances of voluntary benefits and willing to tirelessly shop the market on your behalf. No sense in doing it yourself, Stocks says, when a broker can do it at no cost. "Im not kidding you--it's a jungle out there. It's really helpful to have someone who understands this stuff." The Problem with HR Pitching Voluntary Benefits..... Remember when critics were lashing out at the state of California and Arnold for aggressively pitching Long-Term Care to its residents. It seems as if many expect state governments to avoid being a marketing channel, even if the product is in the state's own interest. Some would say the same burden should apply to employers. Warning - HR Capitalist opinion ahead which many Benefit professionals will not agree with.... Topic - "Voluntary Benefits", defined as benefits in which the employee pays all of the cost, provide employees with options for benefits and insurance coverage they might not otherwise be able to afford. The affordability of such benefits is usually enhanced by the face that employees can often pay for voluntary benefits with pre-tax dollars. Sounds noble, right? Here's are a few problems that are often overlooked: -Voluntary benefits usually include benefit classes like supplemental life insurance, long-term care and auto/property insurance that can have wildly variable cost structures based on the provider and the demographics that are insured. -HR shops don't do RFPs that closely canvas each class of voluntary benefits. They usually are hit by a comprehensive provider like an ADP, which provides a package of voluntary benefits with some high margin products built in. If an HR shop doesn't do a comprehensive provider of the benefits, then they are usually assaulted by the bank, or insurance agent with the most aggressive marketing strategy. In that scenario, HR people are often bad at saying no. -Everyone, including the employee and the voluntary benefits provider, loves the concept of voluntary benefit costs being automatically deducted from their paycheck. Employees love it for the convenience and the fact they don't have to track it. The providers love it because they don't have to collect money. Once the automatic deduction is in, it's hard to get out. Put all that together, and it's complicated. Here's the biggest issue I have, and one of the reasons I haven't opened my shop up to voluntary benefits since I arrived at my current company - I feel responsible for the solicitation. If I'm going to open up our employee base to a voluntary benefit, for which the employee is going to pay 100% of the cost, I feel like I am VOUCHING for its quality and value across the marketplace. And there's no doubt that employees expect you to be looking out for their best interests. So, they take the voluntary coverage, if available, often without shopping. If I am going to allow an auto insurance product to be marketed to my employees through our normal channels, I feel like I need to say the quality/price combination is the best in the marketplace. And that, my friends, is hard to do. And that's why I traditionally have said no to the concept of voluntary benefits. Clarity of vision Group vision may be out of focus for many brokers, but Patrick Tibbs has a clear picture of how the product helps his clients and his firm keep a healthy perspective. By Robert L Whiddon July 1, 2008 Costing employees just a few dollars a month for individual or family coverage undoubtedly consigns vision to the bottom of some broker's "to sell" list. There just isn't enough money in it to get all worked up about it, some say. But other advisers are taking a broader look at the current employee benefits market and see more clearly the value of vision - not only for the employee, but also the employer and of course the group broker. Advertisement "We look at vision now much differently than we did even two or three years ago in regards to the importance that an employee would maybe put on that particular program," says Patrick Tibbs, agency manager for MMA Employee Benefit Services, an arm of Goshen, Indiana's Mennonite Mutual Aid. Whose Bottom Line Is It Anyway? It's less about dollar signs for Tibbs than it is about understanding the plight of the typical employee he aims to cover for his clients. "Things have changed so much for employees in regards to costs. Not only the health care cost of benefits, but just overall costs that employees are having to deal with outside of work. I'm talking about gasoline prices, groceries - just the cost of living," Tibbs says. It's all forcing the employee to take a really hard look at what's coming out of their paycheck. Vision benefits can provide immediate and intelligible cost relief. It also makes good on often promised cross-benefit preventative opportunities. "A vision check may be one of the few times that an employee may go see a doctor for some kind of check up," Tibbs says. Couple that with the fact that many vision benefits are easy to comprehend and that the check-ups rarely - if ever - involve drills or needles and before a company realizes it, they're catching medical mole hills before they morph into hospitalization mountains. One such opportunity to catch medical costs before they multiply is with diabetes. When blood glucose levels remain too high for a long period of time, changes can occur in the tiny blood vessels that supply the retina of the eye. This is known as retinopathy. Such damage is often difficult to detect. Regular vision checks help make sure the problem doesn't get out of hand, which could lead to blindness. It's the "win-win," according to Tibbs. Keep it simple He says vision can be simple for everyone involved. From carrier to employee, and everyone in between, there is no reason for confusion when it comes to vision benefits. He admits that runs counter to the prevailing trend in benefits. "People expect it to be more complicated than it is. And it's not," Tibbs says. "I think that's the most surprising thing that we have to sometimes undo. Employers, HR, agents, benefit professionals, brokers I think we all and the industry have become very specialized and it's become very complex. Vision is a breath of fresh air because it is so simple and it's so simple for the employees to understand and to use." It's simple for Tibbs as well because he's cultivated a fruitful relationship with VSP, and only VSP. He'll work with other carriers, nothing is stopping him from doing so, except his experience of course. And it's been a positive experience at that, he says, recalling the five years he's teamed with the carrier. "I've just had a very good comfort level in regards to the service and the benefit that they have provided, though I know there are some [other] good carriers out there," according to Tibbs. His firm works with about 150 employers, offering the whole menu of employee benefits - major medical, vision, dental, other voluntary products, as well as administration services. The agency's mix of business clients includes car dealerships, manufacturers, businesses related to the recreational vehicle niche, as well as dental and medical practices, churches and sole proprietorships. Case sizes range from four to more than 200 lives. "We just wrote a four-person vision group," he says. And when they do write programs participation is also good. "We'll get anywhere form 65% to 75%," according to Tibbs. The last big enrollment he did was for his firm's parent organization - Mennonite Mutual Aid. While focused on the value of vision, his agency isn't blind to what drives revenue in group benefits. They do major medical with the majority of their accounts and then work downwards, adding vision, dental and some of the other ancillary programs. Comprehensiveness is the goal. "That's our goal to try to become that solution for our businesses," he says. But not everyone is buying As good and as easy as Tibbs may make vision sound, not everyone is buying. He says that's due in part to the general anxiety and uneasiness employers and individual employees have about the economy. "Especially small businesses. In certain sectors that I'm seeing they are quarter-to-quarter right now as far as running their business," Tibbs says. That's forcing him to adjust. One way he's tacking to better meet client needs is being hyper-mindful of employee time off the job - and that includes benefits education and enrollment meetings. "[Employers] don't want to have five meetings a year, it costs them too much money," he says. It doesn't matter how many benefits are being offered, the advantage goes to the adviser that can successfully communicate the programs in just one or two meetings and can integrate them into the company's existing program expertly and efficiently, according to Tibbs. Linking wellness and voluntary funding Payroll deduction has proven to be a powerful employee motivational tool in meeting health and wellness goals at Nature's Sunshine Products Inc., a Provo, Utah-based manufacturer of herbal and vitamin supplements with 500 full-timers and 75 part-timers. Employees enjoy the convenience and affordability of paying for a discounted membership to their nearest Gold's Gym, which is $18 a month. But there's also a built-in incentive to show up for a workout: They can earn a $1 credit up to $12 applied to the following month's payroll deduction. "We were trying to think of a way not to just subsidize memberships, but actually encourage people to utilize the facilities by giving them a credit when they go," explains Christine Frazier, the company's manager of insurance benefits and wellness. On the voluntary benefits side, options include group life insurance, long-term disability, legal services, homeowners and auto insurance policies. "We want to offer benefits that will be valued by our employees and help them focus on their work, as well as help us attract, retain and motivate talent," she says. But the emphasis is clearly on health promotion, which isn't surprising given the nature of employees' work. Those who fill out a health-risk evaluation and agree to screenings to detect elevated levels of cholesterol, triglycerides, glucose or blood pressure, enjoy free access to a lifestyle coach, up to four hours of paid time off every six months and premium-free coverage as part of a self-insured medical plan. Under the firm's most popular option, employees pay out of pocket for each doctor visit until they reach their $500 annual deductible. This shared-responsibility approach serves to hold employees more accountable for their behavior, which Frazier says also makes them more knowledgeable. It also has generated tremendous results. The company's health insurance costs have increased less than 2% a year, with about $5.5 million in savings reported since 2003 based on a close tracking of health claim dollars and 10% health trend assumption. Nature's Sunshine Products earned the top honor for most improved company and landed on a list of the nation's healthiest companies in an annual awards competition involving more than 1,000 employers sponsored by the firm's health evaluation provider, Interactive Health Solutions. The results were based on an aggregated lipid profile score in 2007 that was 61% better than the previous year's result. "We believe that chronic disease is preventable," Frazier says, noting that lifestyle changes can prevent up to 75% of such conditions nationwide. Breaking the Cycle The way it works now, many advisers make it or break it in just a few days each year - open enrollment. By Molly Bernhart March 1, 2008 Employee communication has always been a challenging part of an adviser's job. Not only do many employees lack an understanding of employee benefits and the role they play in an individual's overall financial strategy, they may be reluctant to learn more about their benefits if communication is coupled with bad news. Bad news may come in the form of the implementation of a consumer-driven health plan, higher co-pays on traditional health insurance, a change in health insurance carriers or a confusing 401(k) enrollment. Even if it saves the employees money, it can be seen as an inconvenience. A confusing, stressful or angry enrollment meeting is not the ideal place to educate or attempt to sell a mix of voluntary products. Advertisement More advisers are revolting against the concept of annual enrollment, saying the best way to enroll employees in voluntary is by running a separate enrollment meeting. Dual enrollments for core and voluntary make sense for many. Separate enrollment meetings - outside of the regular enrollment cycle - can also be an effective tool to help communicate a new product, like a CDHP or a new line of voluntary offerings that the adviser would like to highlight. There are times when breaking off voluntary enrollment may not be wise, however. If it's voluntary dental or vision, many advisers will still keep it with the core enrollment because it would follow well with health. Multiple enrollments appeal to advisers for several reasons. First, it enhances their offering to their clients and secures their role as a proactive partner in the relationship. Second, increased education and communication should yield greater participation and more revenue for the adviser. HR professional and benefits columnist Richard Quinn says employers have an incentive to break the strangle hold of annual enrollments, too. "Communicate when there is no apparent reason to do so and do it often. Break the cycle of here comes the communications, here comes the bad news,'" Quinn says. He recommends HR professionals send regular emails outside of enrollment that give employees tips on how to best use their benefits. Tell people what's coming and give facts so people can see how well they are doing compared to averages, say in their 401(k) plan, Quinn advises. That's where advisers can also lend a hand. Advisers should take an active role - even if HR doesn't see it as an issue - by stepping up these communications as well as workplace visits for enrollment and education sessions. Sometimes there is resistance from HR because they see moving anything outside of the traditional open enrollment time as opening up Pandora's Box. "HR has shown some pushback to the dual enrollment. But for employers that have many voluntary plans available, it gets too confusing. When people get hit with rate increases and there's pushback with the core plan, then they're not willing to put money into the voluntary plans," says Bud Martin, president of Martin Financial Services. While benefit managers may interpret more visits from advisers as more work for them, Fernando Lopez, President of San Francisco-based Benelopez says this practice actually eases the workload for HR. Extra visits means he is extra visible and accessible to the client's HR staff and other employees, says Lopez. This way the adviser can help field some questions gradually throughout the year, rather than having HR face an onslaught of questions once a year. Also, if there will be benefit changes announced at an enrollment meeting, constant communication is a good way to tell them in advance, so they're not quite so surprised and upset. Taking the heat and fielding difficult questions and concerns from employees proves the adviser is willing to work hard for his customers. Increased awareness of his firm and the adviser's involvement should only help his sales. Whether employers realize it or not, employees value voluntary benefits. An Aon Consulting survey found that 80% of workers say voluntary benefits are either valuable or extremely valuable. Just 67% of employers measure the success of voluntary programs, however. There is a disconnect. Advisers can capitalize on voluntary interest by getting communications out to employees and making it a prized offering. "It's commendable if you're able to get to the employees of your clients on a quarterly basis, I mean it's commendable to get that level of response from your clients," says Frank Tosto, VP of employee benefits for Hilb, Rogal & Hobbs in Stamford, Conn. Tosto says, he finds multiple enrollments helpful, but an equally important factor in successful employee communications is that employers make the enrollment meetings a priority. "I recommend mandatory enrollment meetings," Tosto says. Giving someone the option of not showing up to an STD seminar won't work. "You've got to be a pretty high-end person to even think about short-term disability," he says. If employers really want to convey the value of their benefits offerings and advisers want to uphold their role as benefit educators, they both need to make enrollment a priority. That may mean offering multiple enrollment opportunities throughout the year. Step Up And Stand Out Many advisers and employers give group life and other ancillary products short shrift January 1, 2008 The first time new parents hold their newborn, the last thing likely on their minds is life insurance. However, right along with diapers, bottles and carseats, adequate life insurance is just as vital to making sure their little one's needs are met, experts advise. "Becoming a parent is a very important time in employees' lives to be considering their life insurance needs," says Jim Gemus, Prudential's VP of life product management. "It's about protecting the people you love, so it's worth taking some to think about how much you need to be well covered." Advertisement David DeGeorge, vice president of MetLife institutional business, says it's easy for employees - particularly euphoric yet sleep-deprived new parents - to gloss over life insurance. "Health care overshadows all, and when it comes to life insurance, no one wants to think about that," he says. But all the same, "life-stage events should be triggers for assessing all insurance needs." Employers and advisers don't always take a proactive approach to educating employees about their life insurance needs and providing meaningful entry points to increase their coverage, experts observe. Although health plans have claims data to rely on to know when and how to target new parents, life insurers have it a little tougher. However, says, Gemus, "To the point an employer is willing to share demographic information with us, we can reach out to employees as these types of life events are happening." As they work with employers to gain access to new parents for communications and education efforts, "employers need to be a neutral and unbiased party," emphasizes Matt Purington, director of life products for Unum. "It's incumbent on insurance companies to get access to employees, hold enrollment meetings and find entry points to get the message across." While remaining neutral in advising employees, DeGeorge says employers still are a key part of the equation. "I don't think you can underestimate how much employees rely on employers for benefits information." Seven pounds, 14 ounces, $500,000 in life insurance Nor can benefit managers underestimate how much employees need that information. According to MetLife, although 75% of new families say having enough money to survive income loss is a main concern, only 50% of employees have life insurance. Of that amount, 45% say they believe their coverage is not enough. DeGeorge estimates that the median household has 2.8 times salary in life insurance, which experts say is no where near enough. Conventional wisdom holds that most families should have between five and 10 times their annual salary in life insurance to cover final expenses, large debts like mortgages and car loans, large ongoing expenses like health care and child care, and other future costs including education. Most significantly, experts stress that life insurance should help parents cover the income loss. Most employers offer a basic life insurance benefit of one to two times salary, and some cap the maximum benefit at $50,000, which, Gemus says, "is not sufficient in any situation, let alone one where multiple people are depending on one income." The majority of employers offer supplemental life insurance, "the challenge is getting employees to take advantage of that benefit," he says. That is what makes targeted communication about life insurance, particularly to new parents, so important, experts say. Seventy percent of employees cite a high interest in benefits communications tailored to meet their needs, with 73% valuing life-stage information, Prudential finds. Life-stage communication is "certainly an underserved market, and employees recognize they need help," DeGeorge says. "So the important thing is partnering with employers to get them the help they need." Gemus suggests pairing visual images with targeted content can help bring the message home for new parents. "Photos of young families or of infants get their attention and let them know you're speaking to them. Online videos that share stories of couples where one spouse died suddenly and speak to the importance of life insurance can provide an emotional wake-up call." Off-cycle enrollment emerging as strategy Even when life insurance communication is targeted to new parents, the message can get lost during open enrollment. As such, some insurers advocate that employers shift enrollment for life insurance and other voluntary products "off-cycle," separating it from the core benefits enrollment. Gemus suggests a time in late winter or early spring, after the main open enrollment period is closed. "When given the time, tools and access to think about life insurance, and information is clear and understandable, people act," says DeGeorge. He adds that MetLife has been helping with off-cycle enrollments for "a number of years now, and average participation for life insurance increases 15%," with many in the "prime needs segments," like new parents. Understandably, asking harried benefits managers to oversee not one but two enrollment cycles could prove daunting. MetLife offers to manage the entire process, however. "We take away the work. We manage the call center, mailings to employees, staff reps onsite, set up a Web site, manage enrollment," DeGeorge explains. "It's much less intensive for employers; we're stepping into their shoes. All we ask in return is their engagement and endorsement." Financial planning assistance Further taking the work, not to mention liability, away from employers is financial planners who can aid employees in assessing their life insurance needs accurately. "Many younger workers rely on their employer to be their personal CFO, particularly when life events happen," says Meridee Maynard, senior vice president of life products for Northwestern Mutual. "Employees need to take a step back and talk to a financial professional about planning, saving and prioritizing. "Unum's Purington agrees, adding that "a lot of insurance companies are offering financial planning services so along with providing a benefit they can provide expertise." For employees, there is much to consider beyond how much life insurance they need to buy. "There is a place for both term and whole life insurance," Purington says, "sometimes for the same person. "With term, you can get higher amounts of coverage for less, but it doesn't have any cash value. Whole life has cash value and a guaranteed death benefit."For single-earner families, new parents still may want to insure the parent that stays at home, Purington points out. "Research has shown a stay-at-home spouse has a value of $120,000 a year for their work in the home." In addition, he says, new parents may even want to consider insuring their child, "because a whole policy can build cash value and be converted to term when the child reaches adult age, and a term policy can be used to cover final expenses." Lastly, Purington encourages new parents to think about accidental death and dismemberment coverage, as accidents are the leading cause of death for individuals under age 45, he saysThese considerations can be too much for benefits managers to handle, says Jay Boyle, a financial adviser for John Hancock. "Benefit managers are so overwhelmed with what they need to do day to day, that they just don't have the time to talk with people about these issues." Northwestern Mutual's Maynard concurs, adding that new parents are just as stretched for time. "The benefits environment today is more complicated than ever, and we all have busy lives - especially new parents. But now that they have a family, it is the time to think seriously about their future financial security." It's all about the rates, or is it? Advisers and carriers disagree about the role rates play in life sales. Many advisers and carriers say rates are competitive, so advisers should look deeper to find the right product for their clients. "The product is treated a lot like a commodity and I think unfairly so," says Michael E. Shunney, senior VP for Sun Life Financial's Employee Benefits Group. Sun Life hopes to jump onto LIMRA's list of the top ten life carriers for 2007 with its addition of Genworth's benefits operations last year. "If you were a company that chose to compete exclusively on price I think that would be a proposition very difficult to have hold up over an extended period of time. It's important to provide benefit advisers and their customers with reasons other than just rate to choose a group insurance company and we've certainly endeavored to do that." But have advisers endeavored to look past rates? "What stands out in life? Rate," says Dave Bommarito, founder The Benefits Group, which is based in Rochester Hill, Mich. "It's amazing how it changes form carrier to carrier when I quote. One day everybody will be 17, 18, 19, 20 cents (per $1,000 of coverage) and 2 cents or 3 cents on AD&D. Then all of a sudden I get some guy at 13 or 12 cents. Crushes them, crushes everybody. There is no rhyme or reason. A carrier is lousy, lousy, lousy and then bam. Where ... did they come with that rate? It's just so good. It just crushes everybody" Bommarito concedes he's more fanatical about rates than the average broker, adding that brokers are generally more preoccupied by rates than consultants. Still, he thinks decision-making on group life is focused on rates. "Maybe someone says they are going to throw in their travel assist or maybe an EAP, [but] it's really [the] rate that drives it usually," he says. Medical carriers tap into voluntary market December 4, 2007 Although medical carriers continue to consolidate, that doesn't mean they are offering more of the same old thing. It appears more and more major medical companies are branching into the voluntary market, according to a study by Eastbridge Consulting. The depth of this trend varies widely as some companies are offering a full menu of voluntary products while others are just introducing one or two. "We recognized that more and more medical carriers were calling us and asking about getting into the voluntary market," says Bonnie Brazzell, vice president of Eastbridge. Advertisement The report shows that 30 of the 40 medical carriers surveyed offer some voluntary products and another five either have access to voluntary products through a subsidiary company or are in merger talks with companies that offer voluntary. "It was more qualitative data although we hatched some quantitative statistics," says Brazzell. "The trend was clear that they're all looking at voluntary products and they're trying to make them part of their offerings, not necessarily as part of their major medical … Most of them have it as part of the ancillary benefits they offer." In the past, if a medical carrier offered voluntary it was limited to dental and vision. Now, more than 80% of those surveyed offer voluntary dental, but 78% are also offering life and 68% are offering disability. Just over half of the companies surveyed offer voluntary vision. However, voluntary medical products like limited benefit medical, critical illness and hospital indemnity are less likely to be offered. Most medical carriers are not packaging voluntary products with their medical plans, instead they leave it up to the broker. Eastbridge says they're not seeing brokers packaging them very often. Carriers are trying to encourage packaging and cross selling by offering price discounts to accounts that allow ancillary products, including voluntary. Brazzell says this is a notable trend because it raises an interesting question about the adviser/carrier relationship. "Are the advisers taking the medical companies there or are the medical companies taking the advisers there? My belief is that it's a little bit of both," says Brazzell. "Clearly, from the research we've done with employee benefit brokers and advisers, they're all getting much more serious about voluntary products. So, I think they're kind of walking hand in hand as the carriers see more and more of the brokers that sell for them also selling voluntary. If [the carriers] don't get on the bandwagon [brokers] are going to be selling someone else's voluntary products." Worksite allure continues to build for ranks of group health advisers By Robert L Whiddon November 1, 2007 The market is there. Statistics show that more and more employers are looking to voluntary benefits market sold through worksite distribution to fill gaps created by their health care cost management efforts. Yet many traditional group health advisers continue to sniff at the mention of worksite sales and marketing. Experts, who either never experienced or have overcome such reluctance, agree that modern benefits advisers would be wise to embrace the movement or face irrelevance. Health advisers ready to do so should take note - worksite sales require a much different approach than group medical. Advertisement Research shows that not only is there a broad shift to worksite underway in the employer market, but now is an especially opportune time for brokers to join the ranks. LIMRA reports that worksite sales increased 12% during the second quarter of 2007. That's the fourth consecutive quarter of double-digit growth as reported by the thirty-two carriers that comprise LIMRA's worksite survey. The growth is being driven by voluntary health offerings. Ron Neyer, LIMRA's senior research analyst for worksite also points to the thousands of employers who indicate their interest in adding voluntary benefits. LIMRA conservatively estimates that 154,000 firms with 10 or more workers will introduce a new voluntary plan within the next two years. Its liberal projection calls for 363,000 firms to do so. "It's up to the industry to convert these prospects into customers," he says. So why haven't they? One reason may be arrogance. Phillip Vance, director of special markets for Bankers Fidelity Life, says it's no time for health advisers to be haughty. Not only is there money to made, but also advisers have an ethical requirement to aid their clients. "Employers are just getting beat to death with rate increases on their health insurance," Vance says. "They are passing more premium along to the employees. Some are even discontinuing their coverage. The problem isn't going to get any better any time soon." As employers continue to manage the bottom line, shifting premium or reducing coverages, gaps emerge. These gaps present advisers an opportunity to introduce new products. Which, Vance says, raises another issue for health insurance advisers to consider. "If we don't offer voluntary products ... I guarantee you somebody else will," he says. He also cites the dwindling agent force, noting that his home state has lost thousands over the last decade. "Is this a problem? Possibly. Is it an opportunity? I think definitely," Vance says. "If we are to remain and continue as a part of the security delivery system we must secure our clients and the needs of their employees through voluntary worksite," Vance says. Jim Christenson, director of workplace for Philadelphia's Emerson, Reid & Co., also says the worksite market offers health advisers an attractive revenue opportunity as well as a good strategic opportunity with clients. "It really does increase your first year income," he says. A small employer health broker, one that may drive about $14,000 in commission from a 60-employee client, can expect to add about 20% to that with the addition of one or two voluntary benefits. The money is there, as long as it is done right experts say. When traditional group health advisers decide to tap the worksite market, they will need to make sure they do it correctly. A big issue for Christenson and Vance is working conditions - the who, what, when, where and how employees are given the opportunity to review and select coverage. Group meetings won't work. It's one-on-one time, whether that is face to face or on the telephone. Enrollers and employers must agree on how workers will buy the benefit. "I would rather have 25% of a good enrollment than 50% of a bad one," Christenson says when trying to pinpoint the right revenue share. "I have seen all manner of types of reimbursement back to the health insurance broker for providing a reference to do worksite. It's based on the quality of the enrollment." Another habit health brokers will have to kick is spreadsheeting. There are too many carriers, too many products and the permutations for each line are too confusing for casual observers. Experts like Christenson and Vance agree that a knowledgeable worksite adviser will be able to marry the case, the product and the three or four most appropriate carriers. Underwriting concessions are crucial, says Christenson. Health advisers are used to watching their major medical price point move, but not the underwriting requirements. With worksite, the search is for carriers that will offer guaranteed or as much simplified issue as possible. "Generally a company deciding to put in worksite is going to be doing it because the owner wants a particular benefit for the workers or for himself," Christenson says. If the CEO doesn't make the cut, neither will the program. Generational segmentation continues to drive need for varied voluntary offerings Voluntary benefits becoming more specialized to meet modern workforce needs. By Chris Silva September 1, 2007 Voluntary benefits becoming more specialized to meet modern workforce needs.Voluntary benefits becoming more specialized to meet modern workforce needs. Employers are offering a broader range of voluntary products as a way to entice diverse job candidates and retain good workers. Financial counseling, legal services, pet insurance, cancer insurance, long-term care insurance and concierge services like dry cleaning, dog walking and movie tickets are garnering more attention from businesses. Advertisement "A growing number of employers and providers are looking to add to their core services by, for example, putting together group legal plans and adding some lifestyle components," says Joe Purisky, president of Voluntary.com, which manages and operates an online resource tool complete with provider and product information, resources and broker listings. Health-related benefits most popular Employers increasingly have implemented health and wellness initiatives to help curb health care and disability expenses, reduce absenteeism and presenteeism and improve productivity, and their voluntary offerings are reflecting these efforts as well. New research from disability giant Unum indicates that the most common benefits being offered are cancer insurance, accident, supplemental medical and short-term disability. Life insurance and financial services association LIMRA International also finds that cancer insurance is most common, with nearly three out of 10 firms sponsoring these plans on a voluntary basis. Dental insurance continues to generate buzz among firms considering new voluntary options as well. "As more and more employers offer high deductible health plans, I think employees might feel the need to buy some supplemental medical insurance," comments Carl Mowery, a partner with Smart Business Advisory & Consulting. Generational differences Research also indicates employers are attempting to tailor voluntary benefit offerings to a more diverse workforce where gender, age and family status all play a part in selections. "Employers are trying to match the types of benefits offered to the type of workforce they have," says Garry Sullivan, senior vice president with Aon Consulting. In a study it published last year, Aon found that baby boomers (ages 45-60) and Generation Xers (ages 25-40) both purchase disability coverage and life insurance more than any other employer-offered voluntary benefit. However, companies ranked long-term care insurance as the third most popular voluntary benefit for baby boomers (11%), while home/auto/liability insurance was third most popular among Generation X workers (14%). "There has already been a steady rise in the percent of employers offering long-term care insurance, and the need for this insurance will continue to increase," notes Stacy Gray, assistant vice president of marketing and communications for Chattanooga, Tenn.-based Unum. "Obviously, there are generation-neutral issues which are represented in the popularity of disability coverage and life insurance," says Sullivan. "At the same time, an increasing number of baby boomers have begun caring for their parents, which has prompted many of these workers to purchase long-term care insurance as a voluntary benefit for themselves. Similarly, many Generation Xers are buying their first homes, making homeowners insurance a popular voluntary benefit choice for this group," he says. Going down market Not surprisingly, larger companies are more likely to offer voluntary benefits than smaller companies. The percentage of small businesses with less than 100 employees offering voluntary benefits is only 13%, according to Unum. Shawn Flynn, an assistant scientist in markets research with LIMRA, says brokers need to take the initiative and seek out smaller customers. "These smaller employers aren't knowledgeable about these programs, nor are they being approached about them," he says. "Only about a quarter of the employers that really need to know anything about voluntary benefits are being approached by brokers offering benefits. Targeting these companies requires a strong commitment to work with small firms because they are the least likely to have a voluntary plan in place. A crash-course in Worksite Marketing 101 is often necessary for first-time buyers," according to Flynn. Mid-size employers and service firms posted the strongest penetration rate increases for voluntary products over the past four years, LIMRA finds. Regardless of employer size or what age group certain voluntary benefits target, Gray says communicating programs effectively is key for employers to increase participation and achieve return on investment. "A communication strategy is very important. The benefits have to be supported by proper education. While employers are increasingly shifting the responsibility for their employees' health and financial well-being on the employees themselves, many employees appear to be ill-prepared to accept this challenge without assistance," Gray says. As the voluntary market continues to heat up, employers are warming to more alternative benefits like group legal plans. Providers such as Legal Access Plans say growth is in synch with the voluntary market's overall success. Shannon D'Onofrio, a client services manager with the company, says sales are increasing every year. In the past, many plan sponsors did not understand legal plans, but now there is evidence that both advisers and their clients understand the products better than ever. Advertisement "Our industry isn't changing that much with administration, but with familiarity, yes," says Bill Blaine executive VP of Chicago-based Professional Marketing Group. "More and more companies are becoming aware of legal plans." Marcia L. Bowers, the director of group sales for Hyatt Legal Plans, a Cleveland-based subsidiary of MetLife, says one of the past challenges of marketing group legal plans was the nature of the product. "The average American still doesn't have a will, most people don't have their own attorney to call on retainer, so the process is still a little unusual for most people," says Bowers. "Because [group legal] involves legal terminology and attorneys, it might be a little intimidating. It might appear a little complex, and therefore difficult to understand. Although, the broker marketplace is increasingly embracing our product and selling more and more of it, so they're starting to overcome that challenge." The key to group legal sales appears to be clear and simple communication about what the plans offer. The services employees can access through legal plans vary greatly. Some focus on the preparation and review of legal documents like tax audits, living wills, estate plans and traffic tickets. Others cover civil litigation defense, adoption, divorce and consumer protection issues. "The idea behind legal plans is that employees can call and talk to a lawyer before something becomes a very costly problem. So, the plans can be a real cost saver if people are willing to pay that premium," says Blaine. The premium is relatively small at only $15 to $20 a month and is typically paid by the employee. Hyatt primarily installs 100% employee-paid voluntary legal plans, although in a few rare cases, employers will contribute a certain percentage of the premium. "Enrollment is generally around 10% when an employer first offers a legal plan, which is strong for a voluntary program. And we see growth every year in most of our plans," says Bowers. Even though group legal plans are an inexpensive product, Blaine says brokers will need a sizeable group to justify the time they spend communicating and implementing the program. That can take time given common misperceptions about group legal. When legal plans first hit the scene employers were reluctant to adopt them because they feared employees would use the benefit to sue them. Now, most employers understand that legal plans have provisions built in that prevent such sponsor vulnerability. "An employee cannot even get advice from an attorney, let alone representation on anything dealing with their employer or their employment. Attorneys are contractually prohibited from doing that," says Bowers. Bowers encourages brokers and consultants to stress unlimited access and ease of use when touting the benefits of group legal to employers. Most brokers appear to be selling legal plans as stand-alone products rather than bundling them with other voluntary plans because they work differently than many other voluntary benefits. "We do a lot of business through brokers and consultants. Sixty-two percent of our plans were sold by brokers or consultants. So, that market is doing a great job for us," says Bowers. Despite growth in the legal benefit market the overall popularity of the benefit is still relatively small - especially among advisers who have not already embraced the notion of promoting non-traditional employee benefits to their clients. "From everything I've seen legal interest is pretty weak. We have an agreement with Pre-Paid Legal, but I'm under the impression that legal plans are not that popular," says Andrea Kessler, director of business development at Keller Benefit Services, a Bethesda, Md.-based broker. Calculus of workplace benefits shifts Joann Visconto was considering buying life insurance that was offered through the bank where she works. But the policy had a premium that could rise every year, and it wasn't portable, so she would lose coverage if she changed jobs. So Ms. Visconto, who is over 40, called an agent and bought a guaranteed level-premium policy for a similar price. "When you go with a broker," says the Burlington, N.J., resident. "You can tell him this is what I want, and he is going to get it." Increasing numbers of Americans are encountering similar choices as employers ask them to buy their own benefits, including disability and life-insurance policies, medical and dental coverage, and even benefits not normally found in the workplace like homeowner insurance and identity-theft coverage. Few businesses are actually replacing employer-paid benefits with these so-called voluntary benefits -- "voluntary" because you pay for them yourself. But some experts predict that eventually, American workers will have to buy many of the benefits they now get free at work, much the way most of the burden of funding retirement savings has shifted from employers to employees in recent years. For now, many small businesses that could never afford to subsidize benefits are contracting with insurance companies to offer them to workers at a group discount. And large companies are adding more such benefits, figuring that the discounted rates help to offset the pain for employees who are being asked to pay a bigger share of their major medical coverage. Employees can usually buy such benefits at a discount of as much as 25 percent to what they would typically have to pay on their own. But as Ms. Visconto's experience shows, voluntary benefits sold through an employer aren't necessarily the best -- nor the cheapest -- alternative. While it's often hard to beat workplace deals on essential health benefits, consumer advocates caution that employees should weigh any benefit offered in the workplace against similar products they can buy solo. Young, healthy employees, for instance, might find term life insurance on their own that is cheaper than discounted life insurance in the workplace. Danny Sparks, plant manager at Willacoochee Industrial Fabrics, says the Georgia manufacturing concern has always paid the bulk of the health-insurance premiums for its 55 employees. For the company to continue to afford that, Willacoochee's other benefits, including disability and accident insurance, are only made available for workers to buy themselves. "Our major medical continues to go up, and instead of passing along that increase to our employees, we keep absorbing that in," Mr. Sparks says. Many companies also make available benefits that workers can buy to supplement employer-paid coverage, such as life and disability insurance. "It's a nice enhancement to our normal benefits package," says Jan Jedliskowski, director of benefits at Brandywine Senior Care, which operates assisted-living centers in Pennsylvania and New Jersey. Insurance companies, including MassMutual Financial Group, Metropolitan Life Insurance Co. and Allstate Corp., are rolling out more products aimed at individual workers. Last year there were about $22 billion in sales of new and renewed voluntary benefits, mostly life, disability and accident insurance, about double the amount from 2000, according to Eastbridge Consulting, a firm specializing in the area. That represents a small part of the estimated $735 billion spent last year by U.S. employers on workplace benefits, according to the Employee Benefit Research Institute. But insurers are counting on growth. American International Group Inc. says sales of voluntary benefits have grown 25 percent annually for the past several years, and now make up 50 percent of overall benefits sales. And both Aetna Inc. and Cigna Corp. recently acquired companies that specialize in providing limited-benefit medical plans that are sold in the workplace. When benefits are offered for sale in the workplace, employees often assume the products have been independently vetted by their company's officials and are better or cheaper than those in the marketplace. That isn't always the case, though, and consumer advocates and financial advisers say employees should shop around before buying a number of the benefits offered at work. Some benefits offered for sale at work, which are typically simplified, mass-market products, also might not be right for all employees. But when it comes to buying health benefits, it's often hard to find a better deal than what is offered at work. That's because voluntary benefits like medical, disability, dental and vision insurance typically don't require that you undergo any prior medical testing, and employees usually can't be excluded because of their health status. That makes them cheaper for many people, but not all. Young and healthy workers in particular may find they can beat the price on such products by shopping around on Web sites such as Insure.com, Insweb.com and ehealth.com. Companies that currently fund employee benefits get to deduct them as business expenses, a tax break they lose if workers pay all of the costs themselves. Meanwhile, workers may gain some tax advantages from paying for their own benefits. Payouts from disability insurance, for instance, are tax-free if workers have paid the premium with aftertax dollars. Some voluntary benefits, including some health-insurance products, can also be purchased with pretax dollars, reducing an employee's taxable income. One of the fastest-growing voluntary benefits is a stripped-down health plan called limited-benefit medical insurance, often offered to part-time and temporary workers who aren't eligible for a company's group comprehensive health plan. The plans typically cover routine and preventive services with no or low co-payments. But doctor visits may be limited to four or five a year, and overall benefits may be capped at as little as $2,000 annually. Major needs, such as surgery and hospitalization, generally aren't covered or have low benefit caps. Insurance-industry officials say the plans are an affordable alternative to going without health insurance. Monthly premiums for Cigna's limited plans, for instance, range from about $200 to $800 a month for a family. By contrast, the cost for comprehensive coverage is more than $900 a month for the average family, according to Kaiser Family Foundation. Critics of limited-benefit medical plans say an individual could be insured, but still risk ruinous hospital bills. Health-insurance experts say employees should opt for the plans only if affordable comprehensive group coverage isn't available from a spouse, parent or other source. Another benefit that more workers are buying themselves is insurance that pays cash benefits if you are diagnosed with certain cancers or critical illnesses, such as heart disease or stroke. Allstate sells basic cancer policies starting at about $420 a year for family coverage. The policy pays a one-time benefit of $2,000 if you are diagnosed for the first time with a cancer, with the exception of skin cancer, the most common kind. The policy also pays limited cash benefits for treatments and nursing care. But financial advisers and consumer groups say cancer and critical-illness policies are too specific in their coverage to be really useful, and should never be bought in place of a comprehensive medical or disability plan. Both types of policies often have long waiting periods and numerous exclusions for pre-existing conditions, although some policies sold in the workplace are offered on a guaranteed basis during an initial enrollment period.