By Ronald Sanders
June 10, 2010
Anyone responsible for selecting and administering corporate benefits engages in a daily battle to balance the needs of the business with the needs of the employees. It is a strategic and financial struggle to continually find ways to cover a share of the spiraling cost of benefits while trying to maintain the well-being and satisfaction of employees.
Health care benefits are the basis of many corporate challenges and can often make the difference between corporate profitability and red ink. Major medical insurance is the foundation of most employer-provided benefits packages, and employees feel that no other workplace benefit comes close in terms of importance.1
But when health care costs outpace business and household budgets, companies and employees alike feel the pain. Plus, when it comes to attracting and retaining employees, a good health care plan plays a crucial role. As the Baby Boomer generation begins heading for the door, employers are realizing they must engage in a war for talent where the competition is fierce.
Most employers would agree that there is a need for an immediate solution that provides competitive and attractive ways to enhance and complement existing benefit offerings.
Less-Than-Adequate Coverage May Force Desperate Measures
There has been lots of discussion around the health care debate that 45 million Americans are uninsured2 and that 62 percent of bankruptcies occur due to medical expenses.3 However, what has not been heard is that there are 25 million Americans who pay for insurance, but don't have adequate and/or competitive coverage.4 And, 80 percent of those medically-related bankruptcies are filed by people who have major medical insurance.3 These people are considered underinsured.
For many workers in this situation, financial reserves are depleted and debt escalates because of out-of-pocket expenses such as deductibles, copayments, non-covered medical costs, incidental expenses and, in some instances, loss of pay due to absenteeism or loss of work.
When an employee faces financial difficulties, an employer feels the impact as well. According to a new survey, nearly half (48 percent) of workers are so worried about paying off debt, that it is distracting them from work.5
Voluntary Insurance — A Solution to Today’s Rising Health Care Costs
How can HR professionals construct a substantial, vying, and valued benefits package in spite of limited resources, rising costs, and a highly competitive job market?
Voluntary insurance policies enhance and complement existing benefits packages at no direct cost to employers while helping employees improve health care insurance coverage and prepare for the unexpected occurrences of life, all while providing them with premium rates known to be more stable than major medical.
Traditionally, voluntary insurance (e.g., life insurance, disability, accident, hospital confinement indemnity) is viewed as coverage that exceeds an employee’s core benefits package (e.g., major medical and 401(k)). But as the cost of health care continues to rise, many companies are cutting back on core health care coverage to help keep the rising costs at bay. Now the need for voluntary insurance as a cost effective supplement to core benefits has become essential to many businesses.
Voluntary insurance can include policies for accident, cancer/specified-disease, dental, life, short-term disability, specified health event, hospital confinement indemnity, hospital intensive care, lump sum critical illness, and vision.
Broadly speaking, voluntary insurance policies:
• Generally have no direct employer cost. Employees typically pay 100 percent of the premiums.
• Complement existing benefits plans.
• Enhance employee benefits plans, which play a critical role in attracting and retaining employees.
• May reduce corporate taxes by cutting FICA tax contributions when premiums are paid with pre-tax dollars.
• Help employees manage rising health care costs by providing them with cash benefits that can be used toward deductibles, copayments, and everyday expenses.
Arguably, voluntary insurance benefits also help maintain a healthier workforce for employers. A recent survey found that employees without voluntary insurance as nearly twice as likely to skip needed medical tests or procedures as those with voluntary insurance coverage.6 Despite these market pressures, benefits managers are still challenged with creating substantial, viable, and valued benefits packages while faced with limited budgets, rising benefits costs, and a competitive job market.
Businesses of all sizes and across all industries have discovered that the adoption of voluntary insurance policies can help meet the needs and demands for employer-based health care solutions.
1 “Emerging Workforce Study,” Spherion Corporation, 2009.
2 National Health Interview Survey, 2009.
3 American Journal of Medicine, Harvard research study conducted by Drs. David Himmelstein and Steffie Woolhandler of Harvard Medical School, Elizabeth Warren of Harvard Law School, and Deborah Thorne, a Sociology professor at Ohio University, June 2009.
4 “How Many Are Underinsured?” Trends Study, Commonwealth Fund study published in Health Affairs, 2008.
5 “Workplace Options Survey,” February 2009.
6 “Consumer Now More Than Ever,” Aflac/Accelerant Survey, 2009.
Ronald J. Sanders is Senior Vice President, Director of Aflac U.S. Sales and has nearly 30 years experience in a variety of roles at Aflac. During his tenure with Aflac, Sanders has also worked as a marketing coordinator and director of Field Force Development. He most recently served as senior vice president, deputy director of sales, and vice president, Southwest Territory director.