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AIS's Health Business Daily
Featured Story July 10, 2008 Voluntary Benefits Are Becoming More Popular as Employers Scale Back on Health BenefitsReprinted from HEALTH PLAN WEEK, the industry's leading source of business, financial and regulatory news of health plans, PPOs and POS plans. Voluntary benefits are becoming increasingly popular as cost-conscious employers scale back their health benefits and shift more costs to employees. For some health plans, voluntary benefits — which encompass a range of low-premium medical benefits as well as non-health-related products typically paid for solely by the employees — could open the door to a new niche market. Non-health policies include accident, life, home and auto insurance as well as non-traditional benefits that offer shopping discounts, identity-theft protection, wedding protection and group legal plans. While product sales traditionally have come through brokers and even financial institutions, some large health insurers are now moving into what analysts say is a $4.4 billion-a-year market with significant growth and profit potential. According to Eastbridge Consulting Group, more than half of all employers now offer at least one voluntary benefit. In businesses with more than 100 employees, that figure jumps to 70%. In addition, 65% of employees in businesses with at least 10 employees are now covered by at least one voluntary product. And Eastbridge expects the market to continue to grow rapidly. A growing number of health insurers have established a presence in the market by offering voluntary benefit products for their commercial accounts, including products for niche markets as well as specialty benefits bundled with existing medical benefits. While UnitedHealth Group offers a range of voluntary benefit products to its employer clients, a separate specialty business line includes voluntary benefits such as vision, dental, life and disability for employers that package them with medical coverage. Dental, vision, life and disability are extremely popular non-medical voluntary products and among the most frequently offered by employers, the insurer says. United declined to provide financial information for its specialty business unit. Unlike many companies in the field, United takes a group rather than work-site marketing approach, channeling the benefits through the employer. At least two employees must enroll for a vision, dental or life benefit before it can be offered. But Pat Sir, president of United's specialty business, says this is a low enrollment threshold compared to other companies. The threshold for the disability benefit varies according to the employer's industry. Sir tells HPW that United entered the business because customers typically want to deal with as few carriers as possible. The business also has tremendous growth potential, and it's a good business strategy for United "because it makes the company's business stickier when it can offer multiple products bundled into a single package," he says. It also makes the benefits more cost-effective for employers. Where it can, United offers an administrative credit when employers bundle specialty products with their medical products. While not allowed in every state, Sir says, it's available in most states where United has a presence. United says it continues to fine-tune its specialty products. The company's current focus is on streamlining the execution of the products to create efficiencies for its employer customers and broker partners. Plans Test Packages on Own Employees A growing number of health insurers offer voluntary benefit packages to their own employees. Anthem Blue Cross (formerly Blue Cross of California) supplements its traditional benefits package with voluntary homeowners, auto and long-term-care insurance products as well as numerous discount programs. Most popular with Anthem employees: Auto and homeowners insurance. Spokesperson Cheryl Leamon says Anthem manages the benefits while the carrier handles claims and policy administration. Life and disability insurance are provided as part of the company's traditional benefits package. Three years ago Aetna Inc. acquired Strategic Resource Co. (SRC), which it rebranded as SRC, an Aetna Company. Aetna purchased 100% of SRC's stock and paid $250 million for its insurance contracts. Long a player in the field, SRC was administering group benefit products for a niche market: hourly workers. Mark Hanrahan, SRC marketing director, says that the company's products are tailored to the needs of businesses that employ part-time, seasonal and contract workers with typically high turnover rates who are not eligible for more traditional benefits. SRC's medical benefits are limited, although they cover most routine medical care, pharmacy, outpatient and some hospitalization costs. SRC's primary customer is the uninsured hourly employee who has opted to take the limited medical benefit and who then adds other limited benefits, including accident, dental, short-term disability, term life and vision insurance options. Medical coverage is expense-based rather than fixed indemnity. While most hospital indemnity plans pay a set per-day rate and begin paying only after a certain number of self-pay days have been reached, SRC's plan reimburses enrollees for expenses incurred for the most common conditions from day one. Payment limits for hospital stays are determined by the option selected by the employee. There also may be caps on "other hospital service" expenses that are incurred. Another niche market: SRC's limited medical benefits are offered as a transition safety net to newly hired full-time employees who must sit out a waiting period before their full health benefits take effect. SRC administers the benefits through an employer's payroll system so the employer itself isn't saddled with administering benefits for a population with a high turnover rate. "The employer handles the payroll deduction, but we handle enrollment and then interface with the payroll system so there's no premium-recognition process to burden the employer," Hanrahan says. Benefits May Aid Retention, Recruitment But other factors besides cost savings are fueling the growth of the voluntary benefits market. Such benefits offer a competitive edge in an employer's recruitment and retention efforts. Offering a wider menu of benefits — including those that help employees fill gaps in their health coverage — can level the playing field, especially for smaller businesses that compete with larger employers for talent. Growing work-force diversity is also a factor. Jim Barrett, president of American Worksite Insurance Marketing, Inc., says that employers are beginning to realize that a "one-size-fits-all" benefit plan doesn't work well in today's increasingly multi-generational and diverse work force. So it makes sense to offer a menu of core medical benefits plus voluntary benefits so employees can buy what's right for them, he asserts. Employees are becoming more willing to pay for benefits that supplement their core medical package. And as employees take on more of their health care costs, supplemental medical coverage helps when a major illness strikes. Mini-Med Market Is Booming Limited medical benefits products, often called mini-meds or niche medical, are growing at the most rapid pace and constitute 95% of the voluntary benefits market. These plans include hospital indemnity insurance, vision and dental care plans, critical illness insurance and cancer insurance. Also popular: long-term care and disability insurance. Among the most popular non-medical voluntary insurance benefits are life, dental, vision and disability. According to Barrett, employers that offer high-deductible health plans to employees often also offer supplemental medical coverage, including hospital indemnity products and products that cover certain medical conditions such as cancer. The supplemental coverage helps take some of the sting out of the high deductible. If the health plan also includes a health savings account, the supplemental coverage can provide a buffer while the employee's account balance grows. Low-premium limited
medical benefits typically are offered by employers that do not provide
health coverage, such as restaurants and companies that use seasonal
or part-time hourly workers. |
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