Not all employee benefits are created equal. While nearly every employer is looking for ways to cut expenses, particularly in a down economy like we’re currently experiencing, employee benefits decisions should not be based solely on the best available price. Ideally, benefits choices should fit the needs of an organization and its employees. If they don’t, a lower price offers little value.
Not all employee benefits are created equal. While nearly every employer is looking for ways to cut expenses, particularly in a down economy like we’re currently experiencing, employee benefits decisions should not be based solely on the best available price. Ideally, benefits choices should fit the needs of an organization and its employees. If they don’t, a lower price offers little value.
As a producer, you know the importance of understanding the benefits products you sell, including what may seem like small differences between the offerings of various benefits providers. Your understanding of what’s available in the marketplace enables you to effectively identify benefits that not only fit your clients’ budgets but, more importantly, meet their particular protection needs and those of their employees. The result is a win-win situation for all concerned.
Different plans, different costs
Differences exist in all benefits products, but the coverages that likely vary the most in terms of benefits and cost are medical and disability insurance. Employees expect medical coverage to be included in their employer’s benefits package. Employers understand that and most spend the bulk of their benefits budgets on that expense.
The rising cost of medical coverage is leading a growing number of employers to trade their traditional or managed care plans for consumer-directed health plans that shift a greater portion of medical costs to insureds. According to an annual survey conducted by Watson Wyatt and the National Business Group on Health, 46 percent of the 453 large U.S. employers that participated in the study offer a consumer-directed health plan, an increase from 39 percent in 2007 and 33 percent in 2006. The study found that by 2009, 54 percent of companies plan to offer such a program.
While their popularity is increasing and they can save employers money, these plans may not be right for your clients. Discussions with your clients can help you determine the type of plan they want to offer. Once that’s accomplished, you can use your product expertise to help them balance that desire with cost.
This should come as no surprise to you. As a benefits broker, you probably feel that you understand the ins and outs of medical insurance better than disability insurance. Industry research indicates that most benefits brokers rank their knowledge of health insurance higher than their knowledge of disability.
Disability insurance is just as important as medical insurance and everyone should have coverage in place. Group insurance offered in the workplace provides the ideal opportunity for coverage. Understanding the nuances of this benefit as well as you do those of medical insurance can help you guide your clients’ decisions and ensure that they get the disability insurance coverage they need and can afford.
One word
The price of a disability insurance policy often can be influenced by simple words such as “or” or “and.” In some policies, a claimant may be considered disabled if he or she experiences a specified loss of earnings or is unable to work due to injury or illness. In others, a policy can require that a claimant experience an earnings loss and be unable to work. The later definition can allow a lower premium that looks good on paper, but may not deliver benefits when a disabled employee needs them. Generally speaking, an “or” definition provides a lower threshold for establishing disability, making it easier for employees to qualify for benefits.
For employers on tight budgets or in high-risk industries where disability coverage is not readily available, a disability plan with a higher threshold for establishing disability can be a great option at an affordable cost. Just be sure your clients understand how disability is determined before they sign the contract.
Knowing the answers and sharing them with the sales representatives of the carriers with whom you work can help ensure that your client gets the coverage that is the best fit for the organization at the right price.
Many disability plans available today include value-added services, such as access to financial counseling services and elder and disability care resources, at no additional cost. These services, which are being built into more and more disability contracts, enable employees to make use of their disability coverage even if they never file a claim.
Shared benefits cut costs
Dental insurance is a popular benefit with employees. In fact, LIMRA International research released in 2003 reveals that it’s the most requested benefit after medical insurance. While it may seem like most dental plans are the same, that’s not the case.
Plans including features that benefit an individual’s health throughout each stage of life offer particular value for insureds. And there are now group dental plans available in the marketplace that allow family members to pool their collective dental benefits and use their combined benefit dollars in the way that best fits their budget, giving them more control over their finances. Plan members are not limited by individual benefit maximums, but instead have a higher family maximum to share as they choose.
Added services meet real needs, increase product usability. Life insurance is perhaps the most straightforward employee benefit – an insured dies and an insurer pays a benefit. It may seem like there’s not much to differentiate on when it comes to life coverage, but many carriers are offering value-added services such as will preparation that enable insureds to derive value from their life coverage even if they never need to file a claim. Like the services attached to some disability plans, these add-ons are being included in life insurance contracts without charge.
Shifting benefits costs
In today’s challenging economy, and as medical insurance costs continue to rise, an increasing number of employers are finding value in offering voluntary, or 100 percent employee-paid benefits. According to the Jan. 25, 2006 Eastbridge Voluntary Overview, 64 percent of all employers offer at least one employee-paid product in their benefits portfolio.
Similar to high-deductible health plans, voluntary benefits offered in the workplace effectively address the trend toward consumerism, allowing employers to choose the products they wish to offer, in the way that best fits the needs of their employee groups. And the price is right. Because employees pay the entire premium, cost to employers is limited to administrative expenses. The impact to their benefits budgets is minimal.
The value for employees is in the opportunity to purchase the benefits they want on a guaranteed issue basis at affordable group rates through convenient payroll deduction. These benefits are gaining popularity with employees. A 2008 LIMRA report on worksite marketing trends indicates that 61 percent of employees rate voluntary products as important or somewhat important and the Eastbridge Voluntary Overview published in January 2006 reveals that 35 percent of all employed Americans own at least one voluntary product.
The conversations you have with an employer can help you determine if voluntary products would be a good fit for a group, as well as which specific benefits might best fit its needs.
Guiding clients toward value
There are many ways to offer value to your clients and their employees that have little to do with the actual costs of benefits. As a benefits broker, staying aware of trends and options so that you can advise your clients appropriately is key. By partnering with knowledgeable carrier sales representatives, you should have no trouble identifying products that meet client wants and needs and help make you more valuable at the same time.
Marc Warrington is senior vice president of sales at Assurant Employee Benefits in Kansas City, Mo.