No Diving. Shallow water in the Voluntary/Worksite pool !!!

No Diving. Shallow water in the Voluntary/Worksite pool !!!

Jay Butcher

Jun 10, 2010

No Diving.  Shallow water in the Voluntary/Worksite pool !!!

Healthcare Reform and run away premium increases have even the most seasoned brokers nervous about the negative impact on annual commissions.   Voluntary/Worksite products are a natural alternative to fill this void, and agents are flocking to this market space.  Many agents have only dipped their toes in the water before, but now are jumping in head first.  For the agent who is not familiar with this pool however, a headlong dive into the shallow end in could prove to be painful.  The vast majority of agents selling voluntary/worksite products don’t comprehend the full effect that these products have on the employer.  A few common misconceptions are:

  • These products are 100% Employee paid.In reality they are frequently partially paid by the employer and employer frustration can sometimes jeopardize an agent’s other lines of business.
    • Unless there is an HR person that is manually checking the carrier bill against the scheduled payroll deductions, identifying missed deductions, and recouping those monies……….it is partially Employer paid.  If HR simply checks to see if the employee is still active on payroll and NOT whether deductions were collected, then this Voluntary product represents a cash leak for the employer and a possible discrimination issue.  Discrimination can occur when an employer (purposely or unwittingly) pays a benefit for one employee but not others…..as illustrated above.
    • Most brokers don’t realize that in any company of size, there are missed deductions in just about every payroll run.  Why?  There is a laundry list of reasons, but some common ones include, employees taking vacation without earning enough PTO; hourly employees not working enough to cover their voluntary premiums;  medical leave;  terminated the first part of the month; and the list goes on.  All of these can result in missed deductions for the employer.
  • Billing is not a big deal; there is no difference from any other benefits. 
    • Fact is that 90% of employers polled in a survey stated that they switched carriers in an attempt to gain control of the billing headaches associated with Worksite products.Carriers have tried to make billing easier by allowing some companies to pay in arrears and/or  only pay what is deducted from an employee’s paycheck, but the issue remains…….without MANUALLY digging into payroll history how does the reconciler know what was deducted and what was missed?
  • Enrollment outsourcing makes the open enrollment easy for the employer and the broker.  Even the best enrollments translate into a data entry burden for the employer.
    • What happens when the broker or enrollment firm is finished with the initial enrollment?  The carrier puts a big stack of Voluntary Deduction slips on the HR desk for entry into the payroll system.  Even if the enrollment firm uses an Enrollment Module……the success rate of interfacing with the payroll system is at best in the single digits.  So now it’s back to manual entry for the HR desk.  Without automation, it is very easy for the well intentioned broker to unwittingly put the administrative burden back on the employer. Frequent visibility at the worksite means better service and more commissions.  The truth is most employers see frequent visits by worksite enrollers as a disruption to their business and a disservice to their employees. Not all worksite enrollers fit this mold to be sure, but a non flattering stereotype persists around perpetual enrollment of these supplemental benefits.  You know the one, where a rep constantly shows up unannounced on a jobsite actively chatting up new employees and “enrolling” them in the product du jour.  Employers see these tactics as disruptive and self-serving.  Employees complain they felt pressured into purchasing products that they didn’t need or fully understand how that product fits into their overall benefits picture.  Employers desire quality and comprehensive benefits education, not one broker at a time trying to sell their particular brand of coverage.  I have heard clients lambasting these reps by saying something to the effect of “When all you have is a hammer, everything looks like a nail!”

As other authors have stated, there is a need now more than ever for employers to have the ability to craft a benefits package offering a combination of both employer and employee paid policies.  This should not translate into the employer taking on extra administrative burden, discrimination liability, or cash leaks to offer such a package.  Nor should employees sacrifice best in class consultation from a benefits specialist, who can educate employees on tailoring a full benefits plan to fit their particular situation.

There is an exploding trend in the area of employee benefits, and though some agents are slow to move…….employers are not.  We have long read about the “payroll slot” in our magazines and blogs, but it is no longer just a concept …..the future is here.   The payroll provider is the entity that is closest to a client’s data.  Their core competency IS moving data and money…..and they are rushing to get into the benefits business.  Through carrier feeds payroll can easily make worksite products an “employee/carrier” relationship instead of today’s “employee/employer/carrier” model.  The employer in this new paradigm will no longer have to reconcile or even receive a bill……ONLY what gets taken from the paycheck is sent to the carrier.  Any shortfalls in premium are addressed by the carriers with a notice to the employee’s home.  If the employee wishes to keep his coverage he will send a check directly to the carrier, if he does not the carrier will send a data feed back to the payroll engine where the Voluntary Deduction is automatically inactivated and deduction is stopped.  Not that many employers offering worksite products are compliant with their Section 125 anyway, but post-tax deductions are preferred in this model.  My prediction is that in the next 5 years or less…every broker will need a partnership with, or access to a payroll platform.  ADP, Paychex, Ceridian and Netchex all have active designs to compete in the Voluntary/Worksite space.  Some are open to broker partnerships; others are going to be direct competitors.  So get your bathing suit on, your mask and snorkel out because the water is fine…….just be careful you don’t hit bottom when you make the jump!!

About the Author

Jay Butcher is the Managing Partner for Netchex-Benefits, a full service provider that delivers Payroll, HR, Benefits, and Time& Attendance for their clients and broker partners.  Netchex-Benefits helps agents bring technology to their clients that better connect that Agent to the Client and their carriers.  You can contact the author, view a demo or join a weekly webinar at http://netchexjbutcher.digbro.com .