When Dawn Sheue entered the insurance industry 30 years ago, she solely focused on building the best possible core medical plan for her clients. Voluntary benefits weren’t a consideration. “I sold against voluntary benefits for years,” says Sheue, president of Summit Insurance Services, Inc., based in Jackson, Wyo. “It was an unnecessary ‘add on.’”
Then, her neighbor was diagnosed with cancer. She had medical insurance via the local school district — a plan Sheue managed. Still, Sheue’s neighbors were forced to file for medical bankruptcy.
“I felt personally responsible,” Sheue says. “It was painful.” That experience sparked Sheue to investigate voluntary benefits. “I was just relentless about researching these carriers who handled what I always thought were these ‘extra add-ons,’” she says. Now, incorporating voluntary products into the core medical plan is standard operating procedure for Sheue — an approach she has been taking for the past 15 years.
Also see: “11 top voluntary benefit carriers.”
The news that her neighbors had to file for bankruptcy shocked Sheue, given that the medical plan she designed was so robust. “The core plan was so rich that by today’s standards it would have the Cadillac tax,” Sheue says. The out-of-pocket maximum was also quite manageable, around $1,000 — a limit far lower than what many of today’s insured Americans see. “That’s why I was so startled,” Sheue adds.
It wasn’t the medical costs that led to bankruptcy, she found out, but rather the non-medical costs were largely to blame. Living in a rural town meant frequent flights to St. Louis for treatment. Along with the cost of travel, the bills due to lodging and childcare also piled up. “Core benefits are never designed to pay all medical costs, let alone the non-medical costs than can happen,” Sheue says.
On top of that, her neighbor needed experimental treatment. “Nobody’s core plan covers experimental treatments,” Sheue says.
Faced with a life-threatening illness, every patient is going to exhaust all possibilities in order to survive. “If you are fighting for your life, you want every chance possible,” she says. “You just want to live. You want to see your kids grow up and get married and have babies.”
Still, Sheue witnessed her neighbors lose everything. “They had assets, and then they didn’t,” she says. “That’s what was really tough.”
Even though the core plan was rich, and it was non-medical costs that ultimately bankrupted her neighbors, Sheue felt responsible. “This is a failure in my mind,” she says. She also vowed to never let it happen again. “It really became a passion of mine to make sure that I didn’t miss that piece of the benefits puzzle going forward,” Sheue says.
Baking it in
Sheue accomplishes that goal by incorporating voluntary benefits into her clients’ core plan. “Generally, I can save them a lot of money on designing a good core plan,” she says. “Then, I bake in VB as part of the core benefits to better fit their employees’ needs. I often include life, accident and critical illness as part of the core plan.”
Including a first-dollar accident rider in every plan is essential, Sheue adds.
Employers want such polices, too. Accident, CI and cancer insurance were the most in-demand voluntary benefits among employers, according to EBA’s Voluntary Benefits Survey, which polled 231 benefit brokers. Employers are also highly interested in dental, vision and short-term disability, the survey found.
Incorporating voluntary coverage into the overall benefits strategy of a client is a crucial practice for brokers, says Joe Ellis, senior vice president at CBIZ Benefits and Insurance Services. “The most important aspect about voluntary benefits is to not consider them separate from an employer’s offering,” he says. “Think of it this way: You have one sheet of paper to describe your benefit offering. Make sure all items on the sheet have a place and a purpose. They should be integrated into one offering.
“Too many advisers take out another sheet of paper to describe the ‘additional’ coverages, or so-called voluntary benefits,” Ellis adds. “This approach separates the offering into two pieces, and actually hurts the impact of the overall plan. It also diminishes enrollment results. Integration into an overall strategy is key to the perception of and ultimately the success of the plan.”
Out-of-pocket limits are commonly reached due to an accident, critical illness or birth of a child, Sheue says. “Those three reasons can all be offset by voluntary benefits,” she says. Having access to supplemental coverage also prevents shifting costs to other areas, such as workers’ compensation. For example, an employee suffers and injury over the weekend but waits until Monday and claims they were injured at work. “That is happening,” Sheue says. “Not because people are inherently bad. But if they don’t have the money to cover huge out-of-pocket costs, they are desperate. And desperate people make desperate decisions.” That is a situation Sheue — and employers — want to avoid.
That’s why it’s critical for brokers to understand their clients’ employee populations. A broker must know which types of supplemental coverage will be utilized, Sheue says. “Get to really understand the demographics of your employer group. This will help you think out of the box on their core medical plan,” she says. “Using a ‘vanilla’ approach to their core will never save them money. It’s no longer one plan fits all.
Also see: “11 top voluntary benefit carriers.”
“As a broker, we need to understand their ages, genders and where they live,” Sheue adds. “Include their health habits — such as tobacco usage, sedentary versus recreational — and understand what VB plan is a ‘lock’ to include to actually build them a better core medical plan. Most major medical plans no longer include life or first-dollar accident policies. With VB, you can ‘bake it’ back in and either have it be employer paid or split with the employee. Either which way, it’s a core benefit versus being truly voluntary.”
Offering voluntary benefits is a great tool for employers who are looking to manage the rising cost of health insurance, Sheue says. Voluntary costs are very stable, she says — some never increase and others remain level for several years. “That’s a whole different way to look at designing benefits,” Sheue says. “You can only do so much with core.”
Mind the gap
Core benefits have changed significantly over the years — some of the biggest differences today being higher deductibles and out-of-pocket limits. The Affordable Care Act shoulders some of that blame, Sheue says. “Because ACA has not met the true definition of ‘affordable,’ most core plans have become cost prohibitive,” she says. “High deductibles are of no value to a millennial-age employee and even most Gen-Xer’s. You really have to get creative to provide a plan that an employer can still use as a hiring and retention tool and one that has affordable premiums. That’s where VB baked into core really hits a home run.”
Voluntary benefits’ rise to prominence began when rising healthcare costs eroded rich plans, which created gaps in coverage due to out-of-pocket costs, CBIZ’s Ellis says. “Employees recognized there were limits to what the employer could provide, and a robust voluntary benefit movement evolved,” he says. “Employee out-of-pocket costs reaching into the thousands of dollars created demand for insurance products to fill the gaps. Hospital indemnity, accident and critical illness plans are three kinds of insurance that came out of employees’ needs for relief from uncertain and unpredictable expenses. Today, an employer who doesn’t offer such voluntary plans, along with voluntary disability and life insurance, would be considered deficient in its offerings.”
Dental and vision were the top two voluntary benefits employees want most, according to the EBA survey. Accident, CI, cancer and STD coverage also ranked high among employees.
The popularity of high deductible health plans doesn’t deter Sheue — as she often builds in voluntary benefits, such as doctor’s office visits, discount drug cards and covering the cost of X-rays and lab work. Covering any gap is a crucial job for voluntary benefits, she says. Say, for example, an employee tears their ACL. That injury requires an MRI, a costly scan that can easily put a person over their deductible and well on their way to reaching their out-of-pocket limit. A supplemental accidental policy can help defray those costs.
However, helping employers and employees understand the potential of such accidents and the benefit of voluntary coverage can be challenging for brokers. “Sometimes you’ve got to shock people into understanding, ‘this can happen to you,’” Sheue says. That is especially true for millennials, she adds.
That’s why education is so important — and it goes for both employers and employees. Once employers understand the value of voluntary, a higher percentage offer VB to their employees, Sheue says. Likewise, when employees are properly educated about supplemental products, enrollment increases, she says.
One of the biggest misconceptions about voluntary is that employers think their workers won’t be interested in additional coverage because they can’t afford it, Sheue says. That’s precisely the population who need VB, she says, as they don’t have the means to deal with any loss of income. “Those are the employees who need to be educated and almost always participate in voluntary benefits,” Sheue says. “Education and employee advocacy are a critical part of today’s benefits world,” she adds.
“Without it, brokers simply become the Expedia of healthcare. There is so much more an employer can provide their employees if everyone is properly educated as to how to use the whole benefits package.”
Also see: “11 top voluntary benefit carriers.”
Bundling voluntary with open enrollment and using electronic platforms ranked as the top two methods for effectively communicating voluntary benefits to employees, according to the EBA survey.
Brokers must also interact with their clients; the days of spreadsheeting are gone, Sheue says. “I stopped doing that about five years ago,” she says. “That’s just antiquated.
“You have to spend time with your client to understand the demographics and the needs of their people,” she adds.
Reaching employees on an individual level and relating to them in easy-to-understand terms are key, Sheue says. Many voluntary plans can be paid with pre-tax dollars, and can be as inexpensive as $18 per month — which can be covered by reducing the number of monthly trips to Starbucks. “You’re giving up one latte a week,” Sheue says.
The ACA’s impact
While the ACA hasn’t helped reign in rising premiums and out-of-pocket costs, Sheue says, it has created an opportunity for voluntary benefits. “ACA has actually enhanced the ability to include VB on core benefits,” she says. “With deductibles and out-of-pocket costs rising steadily and most MEC plans being bare bones, the opportunity to bake in value is constant.”
An influx of carriers is another boon for brokers, Sheue says. “It’s no longer just the traditional voluntary carriers who are offering programs,” she says. “The most valuable carriers are offering value-adds to their VB programs. Consolidated billing, portability, rate guarantees and enrollment platforms are all tools that the stronger VB carriers are using. That helps brokers to have better solutions for their clients.”
However, there are some brokers in the industry who have yet to catch up to this trend, Sheue says. “It still amazes me that there are brokers in the industry that feel VB is unnecessary — that it’s simply an add on,” she says. “That tells me that the broker doesn’t understand that the benefits world has changed.”
For a long time, brokers have been divided into two camps — those who focus on core and those who focus on voluntary, Sheue says. Both sides need to unite so brokers can best serve their clients, she says.
“You can’t do one without the other,” Sheue says.
Brokers need to learn how to use the voluntary products available today to give their clients an advantage, she says. “Don’t be afraid of it,” she adds. “Just get after it.”
Advisers should test out various carriers, Sheue says, and find the right fit for their clients. Here are three tips for how brokers can incorporate voluntary into their business:
- Talk to their clients. “Many employers are open to hearing about these benefits and how they can help employees,” says Sharla St. Rose, director of voluntary benefits at NFP. “Also, more and more employers understand the financial impact that high-deductible plans have on their employees. Also, even employers who have VB programs in place can use a refresher course and assistance with reviving the benefit programs. Many times, the programs get lost after the initial enrollment and newer employees may not know that the programs are available.”
- Talk to their carrier partners. “Carriers are investing significant resources and can provide helpful information that can ease the conversation between brokers and their clients,” St. Rose says. “They can provide demographic analyses and benchmarking. It really helps the conversation when you can show clients what others in their industry are doing.”
- Form partnerships with trusted enrollment firms and enrollment consultants. “Whether the client ends up electing to move forward with an electronic or face-to-face enrollment strategy, a trusted partner can assist with the implementation, enrollment management and post-enrollment activities,” St. Rose says. “This will likely make the overall process go more smoothly and will give brokers the confidence to continue offering VB to their clients.”
Also see: “11 top voluntary benefit carriers.”
Outlining clear objectives, employing area experts and designing compensation plans are also important for brokers who want to succeed in the voluntary space, says Perry Braun, executive director of Benefit Advisors Network. “The best approach is to make it a focused approach within the business — setting goals and measuring and reporting the results against the goals,” he says. “Also, assigning an individual or team to build the plan. Become subject matter experts — product features, benefits and how the topic aligns to compensation, recruiting/retention strategy for the employer. Finally, develop a compensation plan for the individual/team becoming focused on this area of benefits — it will incent and align the rewards success.”
Not only is adding voluntary benefits in the best interest of a client, it will also add to a broker’s bottom line, CBIZ’s Ellis says. “With downward pressure on health insurance commissions, voluntary benefits are a good way to sustain and increase income levels, while at the same time showing increased value to clients,” he says. “And, with higher employee costs from increased deductibles and coinsurance, we are helping employees deal with unexpected costs, while positioning the employer as more caring and helpful, more sensitive to employees’ situations.”
Sheue is proof. Her business has expanded to include five offices throughout the Rocky Mountain states, and voluntary is a major driving force behind that growth. “We all used to believe that core was king,” Sheue says. “Now, VB is the new king. It is the wave of the future.”
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