In the past, voluntary benefits were often not put directly in front of employees mentioned in a one-off enrollment meeting or hidden on a companys intranet. But as private exchanges gain traction in the United States, many of them led by broker organizations, the platforms are primed to lead to a large increase in voluntary sales.
According to data from private exchange technology provider bswift, approximately 5% of all companies in the U.S. have joined a private exchange. Additionally, Eastbridge Consulting Group found 7-in-9 insurers including Aflac, Aetna and Humana intend to offer voluntary products on an exchange platform.
Voluntary is very popular within an exchange, says Mercers active exchange leader, Eric Grossman. Mercers private exchange, the Mercer Marketplace, has close to 30 carriers and at least a dozen voluntary products available. According to the company, 330,000 employees (730,000 total lives, including dependents) were eligible to select voluntary benefits on the exchange for 2015 open enrollment.
Employers have the opportunity to make something available to their members that their members find to be of value, and do it in a way that keeps costs lower than would be available on an open market, Grossman says.
As more and more employers offer high-deductible health plans, there is a push, explains Don Garlitz, bswifts executive director of exchange solutions, to have employees self-select into supplemental coverage that will help with those deductibles that could reach thousands of dollars.
Ready for it
Employers believe their employees are ready to make such decisions about voluntary purchases. According to the 2014 LIMRA Worksite Employer Study, nearly half (46%) of employers surveyed say their workforce is somewhat or considerably in a better place to make decisions on voluntary benefits than they were the last time LIMRA conducted the study, four years ago.
But are the private exchanges supplies of voluntary offerings meeting the demand? In a recent Array Health survey, 59% of respondents believe the availability of ancillary products will lead to an improved consumer shopping and enrollment experience on private exchanges, but nearly half (47%) indicate that less than a quarter of private exchanges will offer a robust and comprehensive set of ancillary products by 2016.
Private exchanges are not offering enough voluntary products yet, says Array Health CEO Jonathan Rickert, because they have yet to catch up to the demand. The ancillary market is still really working to put their products up on these exchanges, he says. We are getting a ton of interest.
Alan Cohen, co-founder of private exchange company Liazon, which was acquired by Towers Watson, is seeing a high voluntary uptake on Liazon-operated exchanges. The very first client to use Liazons Bright Choices Exchange offered 10 different benefit options, including programs traditionally thought of as voluntary, such as long-term and short-term disability, accident and life insurance.
With close to 1,000 current clients, 99% offer something you would call voluntary, Cohen says. We see massive adoption in the things you would typically call voluntary, he adds. Almost every one of our clients offers products you would think of as voluntary.
A single experience
Historically, voluntary has been an after thought, Mercers Grossman says, not connected to overall benefits enrollment, but rather stuck out there on an intranet and largely ignored.
In contrast, when offered through a private exchange, the products are part of a comprehensive enrollment experience and can be seen as something an employer is making available on preferential terms to an employee, Grossman says. They have the opportunity to drive not only employee knowledge, but [also] employee appreciation, he says.
Part of that change comes from the decision-support tools provided by many exchanges. The enrollment rate of voluntary within an exchange often depends on recommendations made by the system, says Barbara Gniewek, principal at PricewaterhouseCoopers.
Having all of the products presented within the same shopping experience makes it a little bit easier, she adds. If you have an employer that has a high-deductible plan and says, Hey, you can buy this accident plan, I dont think the connection is there, Gniewek says. But if you have an exchange tool and enrollment process that takes you through understanding and giving you recommendations on what kind of health plan you might want to get in combination with voluntary, I think that is much more powerful and that is why we are seeing the pickup rates.
Adds Grossman, in an exchange the products are no longer behind the scenes. It becomes part of a single experience, he says. It is one of the reasons our carrier partners are extremely interested in placing voluntary on our exchange. They know the [products] will be communicated and get resonance with the employee population.
Growth rates
Voluntary products are on an upward trend overall. According to a Towers Watson study, 48% of employers expect to reexamine voluntary benefits as a viable part of their rewards program in 2018 and more than 80% of companies have adopted voluntary products to enrich their current programs at a time when they are reconsidering their financial commitment to traditional benefits.
In the survey of more than 320 companies ranging from 540 to 345,000 employees, more than one third (34%) said the availability of voluntary will influence their decision on possibly moving to a private exchange.
Carriers are always in favor of new ways to get their products out to potential buyers, says Ginger Bates, director of research at Eastbridge Consulting Group. [Private exchanges] are a potential new distribution model and they dont want to be left behind and not ready, she says. But, they feel employers are dragging their feet on switching to an exchange.
There is a wait-and-see attitude across the board the employer level, the broker level, the carrier level, Bates explains. But everyone is trying to make sure they are ready to hit the ground running once the wait-and-see attitude ends.
Looking toward the future, the main changes in voluntary will come from product design, lines of coverage and carrier offerings, Grossman says. We are two years into [our exchange] and have expanded our carrier/product offerings, he explains. I do expect voluntary will continue to be a mainstream part of the Mercer Marketplace and potential other exchange offerings.
It supports the overall value proposition of helping employees buy the medical coverage most appropriate for them, he adds. But also [offers] what employees find [to be] important items in one place. One-stop shopping to meet all their needs at a single time.
It also helps a broker to offer products and services that meet the needs of a client. Since one of those needs is employee appreciation, [voluntary] helps our clients satisfy that need, he says. That is our overarching objective in offering a product on or off exchange.
Frankly, these products do generate commission, Grossman adds. Those commissions help us make the rest of the financials more attractive to employers.
In the near future, all exchanges will have some form of voluntary products, believes PwCs Gniewek. Absolutely it is here to stay, she says. But, at some point people will get the amount of voluntary coverage they need and theyll fluctuate that up or down depending on how their life changes.
Changing family dynamics and the fluctuating financial nature of someones life will dictate how much they buy. It will get to a point where people have the right amount and the growth rate will slow down, Gniewek says. But I dont think thats in the near future.
