Voluntary benefits evolving to meet needs of diverse workforce

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Motivated by the need to meet the changing needs and lifestyle of an increasingly diverse workforce, the vast majority of U.S. employers believe voluntary benefits and services will be important to their value proposition over the next three to five years.

A recent survey from Willis Towers Watson reveals that 92% of study participants view voluntary benefits as an important part of their total rewards as compared to only 73% in 2015.

“The growth of VBS is widespread among employers of all sizes and in all industries,” says Amy Hollis, voluntary benefits leader of Willis Towers Watson. “The appeal is simple. These programs enrich traditional benefits by offering a high level of personalization to employees while leveraging group purchasing power. Moreover, because these programs are voluntary, they add little or no cost to employers.”

Conventional programs many employers have made available for years include dental and vision care plans, supplemental life, accidental death and dismemberment and disability insurance. Other established voluntary benefits many organizations offer are home, auto, critical illness, hospital indemnity insurance and legal and identity theft protection. However, emerging voluntary benefits incorporate newer features such as purchasing via payroll deduction, student loan consolidation/refinancing and multi-life long-term care insurance.

Based on changing interests and priorities, Willis Towers Watson research predicts that the following voluntary options will experience dramatic growth over the next two years:

  • Identity theft protection, offered by 35% of employers in 2015, could double to nearly 70% by 2018.
  • Critical illness insurance, offered by 44% of employers in 2015, could grow to 73% by 2018.
  • Student loan repayment programs, offered by just 4% in 2015, could increase to 26% by 2018.
  • Pet insurance, offered by 36% in 2015, could rise to 60% by 2018.

“In the past, employers have focused VBS programs on the needs of baby boomers,” says Mary Tavarozzi, group benefits practice leader of Willis Towers Watson. “Now employers need to attract, retain and engage millennial employees, who have very different needs and priorities. They also are beginning to recognize that helping employees with financial well-being early in their careers may contribute to a more engaged workforce.”

Core and voluntary benefits used to operate in different silos, but Hollis says more and more employers are presenting them together as complimentary products at open enrollment time. For example, high-deductible health plans, critical illness and hospital indemnity may be offered concurrently. “It’s not just to help offset the HDHP from a psychological standpoint,” Hollis says. “When you are coupling the decision point, something magical happens because employees can see how A can fit with B or C in a way that results in a holistic package.”

While voluntary benefits are cost-effective from an employer perspective, there are also many advantages for employees, not the least of which is the convenience factor. “Payroll deductions mean instead of putting insurance premiums on a credit card, the employee does not incur a credit card fee or a line of credit hit on their FICA score,” she continues. “Furthermore, guaranteed issue of coverage like critical illness insurance or hospital indemnity insurance without medical examinations or individual underwriting can also be a significant benefit for employees with health problems.”

When it comes to actual dollar savings for employees signing up for voluntary benefits, she says they can range from as low as 5% to as high as 70%. “For example, an ID theft program can cost 70% less than on the open market and deliver much better value as far as the plan design and the services delivered,” she notes.

Hollis acknowledges employee resources are finite, so after contributing to their basic medical plan and retirement savings there may not be a lot left over to purchase voluntary benefits. That’s why she suggests that an employer’s voluntary strategy be grounded in demographics, reflecting what employee paychecks can actually buy.

One disincentive for employees considering the purchase of “must have” products like home and automobile insurance may be the lack of portability if they leave the company either voluntarily or involuntarily. “The portability provisions will vary by each line of business and each carrier. In some cases employee coverage can continue but discounts may be lost. In others, policies can be ported on a temporary basis – say up to three years – as opposed to permanently,” she says.

“At the end of the day, the objective of employers is to provide an opportunity for employees to buy plans at a competitive cost that truly help them to protect their paycheck from a retirement or savings standpoint, or stretch their dollars when they are spending money on insuring a house or a car that they would have to pay for anyway,” Hollis says.

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Voluntary benefits Pet insurance Homeowners insurance Auto insurance Life insurance Critical illness insurance Healthcare benefits Benefit strategies