Healthcare Reform's Silver Lining: Did you know voluntary benefits can help fund total benefits communication?
Nov 20, 2015
Although there’s much talk these days about the intended and unintended consequences of healthcare reform, like everything else in life, there’s a silver lining here, too. Most businesses don’t know that offering voluntary benefits can be an efficient and cost-effective way to communicate a total benefits package to employees. That’s because voluntary benefits plans are naturally designed to become a more integrated component of a strategically designed employee benefits program.
This is, in part, thanks to the structure of voluntary benefits commissions, which can be used to help fund benefits communication and/or educational programs, and perhaps more importantly, to offset costs associated with enrollment and Patient Protection and Affordable Care Act (PPACA) tracking and reporting technology. With the increasing role voluntary policies are playing in an employer’s benefits offering, more and more employees are taking advantage of this unique feature to leverage employee benefits communication and education.
When companies give employees more choice around their benefits (an increasingly visible market reality especially in light of the growth in the number and variety of exchange solutions), it’s important to communicate the options in a more employee- or consumer-centric approach, which hasn’t previously been tested. This new line of communications surrounding voluntary benefits can be championed by both in-house and third party specialists working in tandem to leverage a combination of print/online materials, one-on-one meetings, and benefits counseling sessions for employees.
Before going further, there are several conceptual challenges that employers face in rolling out their employee benefits strategy:
- Increasing pressure for exchange-like solutions means employees will be exposed to more options and a more complex series of decisions to make.
- Options are likely to include high deductible plans that are often coupled with new funding vehicles – Health Savings Accounts (HSAs) or Health Reimbursement Arrangements (HRAs).
- Movement toward higher deductibles and increased out-of-pocket exposure signals the need to fill the financial gaps with voluntary solutions such as critical illness, accident, hospital indemnity and short/long term disability (to name just a few).
- With such a vast array of options available (not counting additional considerations such as traditional dental, pharmacy, group life, etc.), helping employees make an informed decision is more critical than ever before.
- Communicating with employees at their level – from Millennials to Baby Boomers – throws more complexity into the mix.
Starting Off On the Right Foot – the 12/12 Communications Strategy
Our approach at HUB is simple and straightforward – to develop a 12/12 communications strategy that speaks to these new options as well as any other important information that employees need to know. Employees are most often confused because they’re thrown into open enrollment with a new set of options or requirements they’ve never seen before. The 12/12 approach sits at the heart of our overall strategic benefits planning process and simply stated, says employees should have an idea of where the employee benefits program is going (and how it might affect them) 12 months ahead of the change with communications/education sprinkled throughout that period; and, continuing on through the 12 months following open enrollment.
We would suggest working with a broker/consultant that specializes in communications/education or that works closely with outsourced partners in developing and implementing their plan. Typically, this type of approach reduces the pressure on the HR team to implement the program and helps build one that potentially offsets the expected (or unexpected) costs associated with a comprehensive communications and education program. Additionally, the required technology and resources must also be considered to ensure that everyone understands the key objectives of the communications plan, how the message will be crafted, who it will be delivered to and how it will ultimately be delivered.
The commissions generated from voluntary benefits can help offset many, if not all, of these costs, while all carriers (including the medical, ancillary and voluntary companies) will often offer additional support or partnership resources they’ve developed to help in these areas as well. And, when employees choose the products that work best for them and their families, everyone wins through this alignment.
Our approach, from basic communication and educational materials to a full-blown enrollment technology platform with one-on-one employee meetings, can often be made available as a way to help the employer significantly offset costs they would otherwise have to plan and budget for – all with the goal of helping employees engage in a total benefits decision environment. A well-mapped plan delivered together with the right enrollment/education firm should lift much of the resource-intensive weight of the benefits messaging assignment from the shoulders of the company’s HR staff.
Some employers leverage the timing of this process and enhanced access to employees by introducing Total Compensation Statements (TCS). For many employees, a TCS might be the first transparent and integrated view of their salary plus cost of benefits they’ve received; and for the employer, the first time they’ve exposed employees to the true value of their investment in their employees. For many organizations/employees, benefits may be as high as 20-25 percent or more, which is especially true for some industries (e.g. non-profits) where benefits are typically a significant percentage of an employee’s salary and an important part of the recruitment package.
Where Rubber Meets Road – Personalized, Not Voluntary, Benefits
For many employees, purchasing voluntary benefits is a new and rewarding experience. When the employer leverages the voluntary commissions for enhanced employee communications and education, employee engagement improves and satisfaction increases. And, while we have observed groups of employees that have never sat down with an HR representative to fully review their benefits on a one-on-one basis (or at least not since they were hired), that’s changing. Research increasingly points to employee satisfaction as a direct result of taking a comprehensive approach to the communications process.
Employees are generally more content when they choose their own voluntary, or what I call, personalized benefits. When they get the message: ‘My employer wants me to select coverage based on value and not cost,’ they tend to choose a more efficient array of benefits. It better meets their needs and the needs of their families, and is ultimately less expensive for the employer.
When an enrollment firm is engaged and enrollment technology is deployed, the value of a company’s benefits offerings is more effectively communicated and enrollment typically reveals a more cost-effective buying decision. (NOTE: Cost-effectiveness is defined as employees who select what they need rather than overspend on benefits they’ll never use.) Employees basically swap their traditional PPO or POS plans for high deductible employer-paid core medical; then augment that coverage with employee-paid personalized benefits.
When shopping for personalized benefits, most employees not only ‘buy-down’ their core medical from what most employers anticipate their employees will choose, but they tend to buy-up with additional lifestyle coverage such as pet insurance and/or legal services. Both the employer and employees win –employees are now married to a portfolio that better meets their needs at a price they can afford. And, as noted above, the employer wins not just because the products chosen were less expensive, but also, because those voluntary benefit choices help fund key initiatives around education, communication and technology. It’s the integrated packaging of the benefits offered, the opportunity for direct contact with employees and/or spouses and the manner in which the messaging is presented delivered through a technology solution that addresses benefit administration needs that creates the REAL value proposition.
Additionally, and keeping in mind that reduced complexity and increased vigilance around compliance are critical, most voluntary benefits will be excluded from the 2018 ‘Cadillac’ Tax, a non-deductible excise tax on “gas guzzler-style” healthcare benefits. Employers can and should be mitigating their excise tax plan design triggers by introducing high deductible plans to replace more expensive core medical coverage and using voluntary benefits to fill the coverage gaps left by higher deductible plans.
The Evolutionary, Multi-Year Strategic Benefits Plan
Seventy-five percent of U.S. employers say that managing healthcare costs is one of their greatest worries. For this reason, 68 percent of employers said they plan to reevaluate their employee benefits strategy to offset the impact of U.S. healthcare reform. Many of these employers will turn to personalized or voluntary benefits to provide their employees with an array of choices while they roll out new options.
Key to introducing personalized benefits to employees and optimizing their value, or any changes in direction, is to create an evolutionary three- to five-year strategic benefits plan. A competent and solutions-based broker/consultant should build a multi-year strategy around an organization’s key performance indicators (KPIs) and create a personalized benefits palette for employees that makes the most sense for them based on the life stage and activities they are engaged in.
Employers should ask themselves the following questions (and more) when developing this three- to five-year employee benefits strategy with their advisor:
- What are our KPIs and how can we craft our employee benefits strategy to support and drive them?
- What role does a traditional benefits program play and how does that change the objectives of our voluntary benefits offering? How do we “personalize” that offering?
- How can we build a strategy that optimizes employee expectations?
- What is our employee education and communications plan?
- How do we fund the additional resources we need, or the technology required to support and drive these initiatives?
Overall, given the many objectives of a multi-year strategy, improving employee satisfaction around all benefits – voluntary, medical and ancillary coverage – is critical and achievable. And, when complemented by a 12/12-communication plan, coverage options can be connected to business objectives, with a successful strategic benefits plan rooted in the convergence of the two.
On the Horizon
The inclusion of voluntary benefits as part of an employer’s total benefits package is helping to pave the road toward a new era of employee benefits selection where the employee owns the decision-making based on static or defined employer contributions.
Similar to the state health insurance exchanges called for by the PPACA, a traditional private exchange model of benefits selection is an online portal with an expanded array of options that provides employees an allowance of dollars to “shop,” while interactive technology helps them choose their desired benefits. A recent survey conducted by Accenture reports that private exchange enrollment will be used by 18 percent of Americans by 2017.
Because not all employers are ready to move entirely to a private exchange strategy, many platforms offer both flexibility and scalability. For employers and their employees alike, mapping a voluntary benefits approach in the integrated manner described above, moves the process toward greater cost efficiency and effectiveness for the employer while employees can personalize their coverage portfolio to meet their evolving needs. For employers, coaching employees in this direction can and should take many forms depending on the audience, scheduling availability and geographic considerations.
But, perhaps even more telling is that beyond “coaching,” employees are more ready than ever to sit in the technology driver’s seat when it comes to choosing their benefits. So, if one-on-one consultations or company-wide infomercials present a challenge, education and communication can be more readily offered on-line, by leveraging voluntary benefits to help craft, fund and deliver the messaging in a way that might just offer the silver lining you’re looking for.
About the Author
Joe Torella is the East Region President for the Employee Benefits Division of Hub International, the 9th largest insurance brokerage in the world, providing property and casualty, life and health, employee benefits, investment and risk management products and services through offices located in the United States, Canada and Latin America. Joe is an expert speaker and advisor on cost, quality, access and the Affordable Care Act and an editorial contributor to a variety of health care and insurance publications.