Voluntary benefits: How they’ve become a must-have product for brokers

Voluntary benefits have become one of the biggest stories in the brokerage world in recent years. With an expanding economy driving demand for workers, employers have needed the flexibility and added coverage that voluntary benefits provide. The growth of Health Savings Accounts (HSAs), with their high deductibles, have also led to voluntary benefit plans that help with gaps in medical insurance coverage.

But another factor has been the growth of enrollment and administrative tools, including online platforms, which have helped make these products easier to manage and understand.

Related: 2018 voluntary survey: The fight grows fiercer

In this three-part series, we will explore how voluntary benefits have become an important part of a complete benefit package, how brokers can expand their voluntary benefits offerings, and how to find the best fit between product, carrier and client.

Voluntary benefits—the early years

The move toward nearly universal voluntary benefits offerings came about rather quickly, but experts remember when those products were considered a specialty insurance offering. Marty Traynor, senior vice president of voluntary benefits and workplace solutions at Mutual of Omaha, notes that at one point, voluntary benefits were considered separate from employer-sponsored benefits. “There’s been a trend toward overall benefit planning by employers,” he says. “In today’s marketplace, what we see is overall planning that encompasses both employer-paid or -sponsored plans, and voluntary plans, which employees paid for.  So there’s been historically a separation of voluntary from other core benefits. But today, employers and their advisors are looking at it as a seamless benefit package.”

Mike Estep, vice president of group products and worksite leader of Guardian Life Insurance Company of America, agrees that there is a more holistic approach to benefit sales today. “The workplace is where employees look to find all sorts of insurance products,” he says. “There’s now an expectation from employees that their employer is going to provide them with a comprehensive set of products.”

Robert Shestack, CEO of the Voluntary Benefits Association and chief strategy officer of Paylogix, says there have been financial motivations as well, reflecting business trends in the industry. “Over the past 20 years, the commissions earned on medical plans have decreased, so revenues have decreased,” he notes. “Voluntary benefits have become a new revenue source for brokers, and they’ve become necessary for survival.”

ACA, HSAs and cost-shifting

Estep notes that cost-shifting from employers to employees on benefits is another factor in the strong growth of voluntary benefits. “The bulk of benefits plans were once almost all funded by employers, but now, it’s about half-and-half,” he says.

He adds that medical cost increases were an issue before the ACA, but that those costs have continued as a pressing problem in the years since the health reform law was passed. “That time also correlated with the proliferation of high deductible health plans, where this cost-shifting phenomena has really taken place,” he says.

The net result has been more consumer attention on health benefits, and more incentive for employees to look closely at voluntary benefits to help complete or supplement their coverage package.

Key elements: educate; administrate

However, finding a good, comprehensive package of voluntary benefits is not easy. Industry experts stress that finding the right tools to educate enrollees and administer the new products is an important key to success.

“Voluntary benefits can be confusing because there’s so much noise and so many people entering the market,” says Daniel Johnson, vice president of sales and marketing for Trustmark Voluntary Benefits Solutions.

“It’s up to brokers to figure out if they want to press the ‘easy’ button, or if they want to actually bring benefit to their customers,” he adds. ”They’ve got to take a step back and figure out what they’re trying to solve. It’s not as much about the product as it is about the back-end services.”

Estep also sees areas such as administration as very important. “There’s a whole other level of rigor and analytics in respect to communication and enrollment tools, which didn’t exist five years ago,” he said. “Technology has allowed us to do a better job with benefits education and enrollment.”

Administration and communication are also key to beginning or expanding a voluntary benefits package, as we’ll find in part two of this series: Expanding Voluntary Benefit Offerings.