Structuring a Successful Voluntary Benefits Program

As the business world changes and compensation and benefit budgets are squeezed, companies are finding that acquisition and retention of employees is an even greater challenge than before. Implementing a customized voluntary benefits program to supplement conventional benefits can be the cornerstone of a successful and financially-sound benefits platform, contributing to a company’s success and employee satisfaction.

Most benefits and Human Resources professionals spend the majority of their strategic planning focusing on conventional, or “core,” employer subsidized plans. After all, this is where most of the company’s financial commitment to benefits resides. However, applying the same strategic thinking into development of a cohesive voluntary benefits program can mean the difference between a successful program with strong enrollment and a program that few realize exists as a benefit of the company.

Why offer voluntary benefits? 
Voluntary benefits are a great way for companies to help their employees secure their financial futures and create tremendous goodwill. The average mid- to low-paid employee does not have adequate access to individual insurance products outside the workplace as most insurance agents selling to the general public focus primarily on high income/net worth individuals. Furthermore, voluntary benefits offer convenience and value above what an employee could purchase on their own in a retail market. The risk characteristics of fully employed individuals purchasing through a worksite program is generally superior to the individual retail market. Insurance companies are therefore willing to offer preferred underwriting provisions, better coverage, and lower rates to this market.

In addition to the advantages that a voluntary benefits program can bring to your employees, the enrollment process inherent in many such programs may help you (the employer) achieve important benefit communication and education objectives – more on this later in the discussion of face-to-face enrollment methods.

Deciding what voluntary benefits plans to offer 
When deciding what plans to offer, a good place to start is evaluating where your employee populations may be uninsured or under-insured with respect to your core employer subsidized programs. All key demographic groups in your population should be considered (e.g., full-time, part-time, new hires in a waiting period, and even retirees).   One size generally does not fit all with voluntary benefits offerings and it is often advantageous to vary plan options by demographic group.

With advances in technology, customizing voluntary benefit packages by employee group is no longer a cumbersome process. For example, YouDecide’s flexible web-based technology platform allows our clients to tailor solutions by employee population so that each group can only view and have access to the plans for which they are eligible. For instance, full-time employees with generous “core” life, health and disability benefits might be offered group auto/home, long term care, and a legal service voluntary plans through payroll deduction; whereas part-time employees not eligible for core plans and with high turnover might be provided a limited medical plan, dental plan and life insurance on a non-payroll deduct basis.

Deciding which insurers and vendors to feature
The number of insurers, outsourcing companies and product options in the marketplace is staggering. A competent voluntary benefits broker can be of enormous assistance in navigating the marketplace and bringing additional services associated with the program. For example, as a voluntary benefits broker, YouDecide conducts a rigorous due diligence process to appropriately match insurers and vendors in the marketplace with companies’ varying needs. Below is a discussion of key factors that we always considered when helping our clients choose the right insurers and outsourcing vendors:

• Company, product and rate stability: Historically, the voluntary benefits marketplace has experienced a high level of volatility in terms of companies entering and exiting the marketplace. While company financial ratings are very important, equally important is their experience, duration of insuring particular products, and a stable rate history. Key questions in comparing companies might include: How long have you provided this product?  What is your current insured membership?  What is your target market and average group size?  In which states is your product not filed?  What is the rate increase history over the past five years?

• Group vs. individual plan providers: Group plans will generally provide a better product value to participants than individual plans due to preferred underwriting/guarantee issue policies, better rates/discounts, and the convenience of payroll deduction (where available). In addition, group insurers may fund a significant promotion and communication campaign to create awareness and excitement about the program prior to open enrollment. A downside to group plans is that they sometimes require more involvement from the employer in terms of a group contract, communication, enrollment and payroll deduction. Individual plans, on the other hand, tend to require much less employer involvement in administration – insurance policies are issued to each individual and are direct billed by the carrier. YouDecide often recommends a mixture of group and individual plans within a voluntary benefits program – depending on different characteristics and needs of the employee population.

• Plan design and cost: Regardless of the product, a comparison of underwriting provisions, plan coverage, limits, exclusions and rates across carriers is important in choosing the best plan. Another key factor that should always be considered is plan simplicity. Complicated plan designs and features may cause confusion among employees both during enrollment and later when using plan benefits. This confusion can quickly lead to a perception that the plan is “not good,” impacting both initial enrollment and long-term success of the plan. Finally, plan offerings should be tailored to be affordable to your employee population. YouDecide often recommends a selection of lower and higher cost options that will appeal to employees in different income brackets.

• Communication and promotion of plan: The quality and method of pre-enrollment plan communication/promotion will have a significant impact on enrollment levels. YouDecide advocates varied methods of creating awareness of a new plan offering. For example, some combination of home mailings, posters, email campaigns, newsletters, intranet announcements, and other avenues will help to generate interest in the plan before and during open enrollment period. It is important to fully understand what method(s) will be used to promote the programs, who will perform the function, who will fund the cost of such communications, what ongoing services are provided beyond initial program roll-out, and what employer involvement is required.

• Enrollment methods: The enrollment method used is perhaps the biggest factor in influencing participation in a voluntary benefits plan. Methods range from face-to-face meetings onsite at the workplace with a professional enroller, group meetings, telephonic (both inbound and outbound calls), web-based, paper forms, or a combination of the above. In general, the more personalized the method, the greater the enrollment you can expect in a given program. Face-to-face meetings provide the highest enrollment level for voluntary benefit plans and are the preferred method of many group insurers. Such enrollment is most often provided by outside specialty firms with networks of contracted enrollers that are well versed on many benefits products and topics. Face-to-face enrollment also offers the opportunity to educate employees on benefits issues important to employers that may not even be related to the voluntary benefit plan. For example, an employer may want enrollers to stress the value of 401(k) participation or educate members on a new complex Consumer Directed Health plan. Some employers have concerns with this enrollment method citing disruption to the workforce (i.e., pulling someone of the assembly line) or the possibility of employees being pressured into buying benefits they might not really want. With a good communication effort, other enrollment methods will also lead to successful plan enrollment and may involve less employer involvement in the process. YouDecide helps our clients to determine which enrollment method(s) are most appropriate given their selected product mix, employee population and corporate culture. It is important to carefully evaluate enrollment capabilities of insurers and/or outside enrollment firms including reputation and historical success as well as to understand the HR department’s required level of administrative involvement.

• Premium collection and reconciliation: Flexibility of carriers with respect to premium collection may be an important factor in vendor selection. Many carriers require payroll deduction whereas others will direct bill, accept credit cards, or debit individual bank accounts. While payroll deduction will generally help boost program enrollment, some employers prefer not to support this function due to concerns with limited payroll slots and reconciliation of premiums. However, many vendors and insurers in the marketplace have worked to reduce the administrative burden of payroll deduction. For example, YouDecide’s SureDeduct technology enables consolidation of premiums from multiple products and insurers into a single payroll slot. If payroll deduction is not a feasible option, many products are still available though direct billed arrangements, but choices may be limited.

Measuring current and continued success
When first rolling out a voluntary benefits program, it often makes sense to take a tiered approach and communicate one or two offerings each year. Too many options rolled out at once tend to confuse employees and dilute interest. The entire program, of course, should be communicated as a whole, but featuring select carriers can allay the concerns oftentimes felt by employees when confronted by important benefits decisions.

Once a plan is enrolled and up and running, monitoring of participation and employee feedback will provide valuable information on how the plan is performing. A voluntary benefits program will be successful if 1) the plans provide value, 2) people are aware of and understand the benefits, and 3) they know how to access the program and are using it. Corrective action will likely be necessary at times to add or replace benefits or to promote certain benefits.  It is critical to maintain communication of the plan – not only for new hires, but for existing employees. Without ongoing promotion, a plan left on its own may fizzle and die due to lack of awareness and enrollment.

Voluntary benefits are an excellent way to provide employees with the benefits they want and need with little or no direct cost incurred by the company. Little perks can make a big difference and show your employees that you care. Take action now and, in as little as 90 days, YouDecide can help you custom design a complete menu of value added voluntary insurance benefits in addition to an array of ancillary financial services and employee discounts, tailored to meet the needs of both you and your employees.