Posted July 31, 2012
Voluntary benefits are becoming more relevant and popular than ever. As consumer-driven plans become more prevalent, consumers may experience higher out-of-pocket costs. That’s where voluntary benefits can come to the rescue. Employees can voluntarily sign up, enjoy group rates and have premiums deducted from their paychecks before taxes (Section 125).
Recently Ameritas Group participated in a survey on voluntary benefits conducted by the editors of California Broker magazine. Scott R. Llewellyn, Western Regional sales vice president, provided the following responses on Ameritas’ views on voluntary insurance market trends and tips for successful benefit enrollment.
Q. What is a compelling argument for employees to have extra money taken out of their paychecks for voluntary benefits when they are cutting back on all kinds of small expenditures in a tough economy?
A. During tough economic times, many people re-evaluate their priorities, often ranking them on a cost-vs.-benefit scale specific to their personal or family needs. Usually rated in the top three are personal health and protecting assets. Although discretionary income may be lower, employees who are offered voluntary benefit plans have a great opportunity to purchase benefits at rates normally not possible to the individual. Voluntary dental insurance is a great example. Dental is the second most requested health benefit after medical insurance. Regular cleanings, exams and X-rays, which usually are covered at 100 percent, protect people from bigger and more expensive problems down the road. Maintaining your health and the health of your family should always be priority number one.
Q. Considering that brokers generally make less commission on voluntary benefits, how can they offer these benefits to clients in an efficient way that provides a good return-on-investment for the broker’s efforts?
A. At Ameritas, brokers earn the same commission levels on voluntary business as on employer-paid. In fact, we continually promote the advantages of selling voluntary offerings alongside the employer-paid offering, as a way of increasing income to the broker and providing additional value-added services to the client. Offering a vision benefit on a voluntary basis alongside employer-paid dental is a perfect pairing. In this tough economy, some employers may be forced to eliminate a benefit or two that may have been paid for previously or partially by the company. Companies can lessen the impact of this benefit reduction by offering those benefits on a voluntary basis, and generally at a cost negotiated with the broker that improves the buying power of the employee. Carriers’ reps should be more than willing to assist the broker at voluntary enrollment meetings to make the process as smooth as possible for everyone.
Q. How can you tell whether a particular voluntary benefit product will provide real value to your clients?
A. In order to provide real value to their clients, brokers must understand fully the group’s specific needs. Experienced brokers can ascertain quickly which benefits make sense for an employer group. There are dozens of voluntary benefits on the market, but a skilled agent will meet with the group and closely pair up the offerings to the needs of the group’s employee population. A good broker can tailor the offerings, simplify the process and assist the HR department in its ultimate goal of attracting and retaining high-quality employees.
Q. Are there certain types of voluntary benefits that go well with different types of employer groups, such as blue collar vs. white collar?
A. To the extent that white-collar workers might have more discretionary income than blue-collar workers, then perhaps there is a difference in the two groups. But from a needs standpoint, all employees are looking to protect their health and financial welfare. As a result, brokers will tailor voluntary plans based on the employees’ specific needs and ability to afford the premiums. If a company’s workers have an average age of 26, benefits will be tailored differently from those of a company with an average age of 40, which, by the way, is the average age of a civilian worker in the United States. It all boils down to knowing your group.
Q. Which voluntary benefits are becoming more or less popular?
A. As many companies struggle to maintain contributions to employee benefits and some are forced to eliminate paid benefits, voluntary benefits such as dental, vision and disability have become top picks by employees. So to the extent that voluntary benefits are being offered in lieu of employer-paid benefits, they are increasing as a percentage of what is sold today. In this economy, more people may be purchasing additional or incremental benefits above and beyond their employer benefits. Offsetting some of the lack in demand created by the down economy is a host of very new and creative voluntary benefits. Brokers are using these benefits to help increase their income, given the new realities of lower commissions from medical carriers.
Q. How do you choose a carrier?
A. It is still all about relationships. Brokers need to know and trust their carrier rep. They need to have a solid history with their carrier. After all, the most important service a broker can provide a group is their recommendation on a carrier. They are putting their agency’s reputation on the line with their recommendation. Selecting a carrier strictly on price alone is a dangerous proposition. You wouldn’t select your hospital or doctor on their low price – but instead on their education, experience, track record and reputation. All carriers are not created equal. Some have customer service calls answered in foreign countries to hold down costs, and some may pay claims in months instead of days. Look for reputation, administrative support, ratings, prior experience and, most of all, relationship with your agency.
Q. When you are presenting voluntary products, do some types of coverages just naturally sell well together?
A. The specific needs of the group will determine what types of voluntary offerings make sense. Simply because some benefits are normally sold together – such as dental and life, dental and vision, or life and disability – this alone is not reason enough to offer these plans together. A broker can analyze the current benefit offering and look for holes in coverage or caps in programs that can be filled with a strong offering of voluntary benefits.
Q. How do you present voluntary benefits in a way that doesn’t overwhelm employees with confusing options?
A. This critical area is often overlooked. The presentation of voluntary benefits can be confusing, overwhelming and difficult for any person outside the insurance industry. Benefits should be straightforward and honest. Offerings should be tested before they are launched. Create a sample group and see how it responds, and whether employees truly understand the cost benefit of each program.
Q. Do you see more unbundling of voluntary benefit options?
A. Again, benefits should be tailored to the needs of the company. A broker should spend time analyzing the current benefit offering and look for holes in coverage or gaps in programs that can be filled with a strong array of voluntary benefits. The broker can select and build a voluntary product that exactly meets the needs of the employer and is selected from the best carrier for that specific coverage.
Q. What changes do you see to the voluntary benefits market as a result of health reform?
A.At the time concrete policies and provisions emerge with the health care regulation, we will better understand the impact it will have on voluntary benefits.
Scott R. Llewellyn is the western regional sales vice president for Ameritas Group, a division of Ameritas Life Insurance Corp., with headquarters in Lincoln, Neb. Llewellyn, based in Encino, Calif., holds an M.B.A.