All benefits are voluntary benefits

Something big has changed in benefits. Employees today view their benefits much differently than their employers. And, for employers and their benefit advisers, how employees understand benefits should change everything about benefit plan design.

Almost all employers — and their advisers — continue to keep widely separated, each in its own labeled box, “core” and “voluntary” benefits, if voluntary is even offered. By voluntary, I mean what I call “enhanced” benefits: supplemental health plans — accident, critical illness, cancer and hospital indemnity — short-term disability, and permanent (whole & universal) life insurance …the most popular and widely-utilized voluntary benefits.

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Also see:11 top voluntary benefit carriers.”

But thanks to the ACA and industry trends such as high-deductible plans, employees today wouldn’t understand the distinction between “core” and “voluntary.” Let’s ignore the labels and take a look at the benefits themselves and how they work together to protect employees’ financial security.

Major medical is designed to keep you from going bankrupt if you get seriously sick or hurt. But benefit advisers know better than anyone that employees face huge financial risk from illness and accident. That’s why supplemental health plans like critical illness and cancer are so popular. Although very different plan designs, both protect employees’ finances when they’re very sick by paying out-of-pocket medical expenses.

Similarly, accident plans put cash in the employee’s hand to pay all or most of the out-of-pocket expenses due to an accident. Hospitalization insurance pays employees cash to cover their share of the hospital bill when they are hospitalized.

Disability insurance is the same. Whether long-term or short-term disability, to employees these are simply ways to insure their paycheck when illness or an accident keeps them from working. And, employees view group term life and permanent life plans as life insurance they can get at work.

A disruptive idea
But here’s a big idea that has disrupted the thinking of hundreds of advisers attending my Broker Boot Camps on cross-selling voluntary over the past several years: To employees today, all benefits are voluntary benefits.

Technically, of course, that’s not true. The employer pays at least 50% of the employee’s medical premium and, likely, provides one-times-salary in group term life insurance plus group long-term disability coverage.

Also see:14 top broker-supported voluntary benefits.”

But here’s how the employee sees it: To put her family on the medical plan, she must come out of pocket and pay the premium. It’s voluntary. For a dental or vision plan, she usually must come out of pocket and pay the premium. It’s voluntary. To get more than one times her salary in life insurance, she must come out of pocket and pay the premium. It’s voluntary.

In MetLife’s 2014 U.S. Employee Benefit Trends Study, 64% of employees reported they wanted “a wider array of voluntary benefits” and 60% said they were “willing to bear more of the cost” of benefits to get that choice.

When employees see all benefits as voluntary benefits, we shouldn’t be surprised that they’re prepared to come out of pocket for enhanced benefits. So, how are you helping your employer clients give employees the voluntary benefits they want?

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