Voluntary, or worksite, products have historically been the most stable of all employee benefits, with prices rarely every changing. However, there are several scenarios where industry experts could see a potential for rate increases with these types of products in the future, so benefit brokers and advisers should be prepared to talk to clients about why.
One reason voluntary benefits have been consistent for the last few decades is because many voluntary options such as accident, critical illness, vision and cancer to name a few are most often filed with state insurance commissioners as individual policies on an individual platform despite being sold at the worksite, says Rob Shestack, senior vice president and national practice leader of voluntary benefits at AmWins Group Benefits in North Kingstown, R.I.
What happens with those products is, it stays the same rate for the same coverage unless a carrier files a different rate with the state for every individual product its ever issued, Shestack explains. For example, there are millions of policyholders for an accident program in California; if they went for a rate increase they would have to let every single policyholder know and go back and change all the payroll deductions at every employer.
As such, in his 28 years in the business, hes never seen a voluntary carrier choose to issue a rate increase. The only time hes seen any sort of rate change was five years ago in Minnesota, when a carrier had to file a rate decrease. Rate increases on voluntary benefits have been the far exception and not the rule, he adds. Now, thats not to say its not happening, even though I have not seen it happen.
Group voluntary and bundling
While Shestack says one of the great advantages of voluntary products is that theyre sold on an individual platform even via employers this allows an employee to take the product with them from employer to employer in the last seven or eight years he says there have been more voluntary products sold on the group track. Meaning, theyre filed with the state insurance commissioners in the group category instead of individual. He says this is simply a result of more and more employers being interested in worksite products.
With group voluntary carriers, they usually do it with a two or three year rate guarantee, Shestack says. After those years, it is subject to a rate increase, but I have not seen any rate increases in my groups. With the voluntary market rapidly growing and more and more policies being sold, there is an increased likelihood of extreme claims. Thats where Shestack could see the possibility of a group voluntary carrier coming to an employer with a rate increase. However, benefit advisers can negotiate on behalf of that employer by simply going to another carrier to get the same rate or asking to open another voluntary product line with the existing carrier with the agreement that the rate wont increase for another three years, Shestack explains. He adds: Its possible this could happen but from a historical perspective it has not happened.
TJ Gibb is a vice president in the voluntary division at Humana. He agrees with Shestack and says we havent seen any rate increases. However, he too says there could be ways for voluntary rates to rise.
For example, if medical and voluntary life insurance is bundled from a particular carrier. I would say theres a possibility with your medical premium, if its say $10,000 a year and life is $150 and its been discounted by the medical carrier 20% in the bundle, at some point if you dont have the bundle but want to keep that life insurance it could go up that 20%, he explains.
On the rise
Overall, however, these scenarios are merely hypothetical. Voluntary products are continuing to climb in sales year over year to fill the gaps that the presence of more and more consumer driven health plans are creating, Shestack says.
In fact, Eastbridge Consulting Group a voluntary marketing advisory firm recently released statistics for worksite products 2013 sales, showing a 4.3% increase to a total of $6.6444 billion. The growth is consistent with recent prior years, Eastbridge wrote. Also of note is that benefit brokers sold the majority of voluntary products with 57% market share next to career agents at 19%.
