More Employers Are Engaging With Voluntary Benefits

Experts say such offerings could help improve employees’ financial wellness and retirement security.

Employers are increasingly offering more voluntary benefits as a way to supplement core coverage and give employees greater flexibility and more choices.

That’s according to a Benefitfocus report, which found that employees have increased their participation in voluntary accident, critical illness and hospital indemnity insurance since 2018. In 2021, nearly 60% of employees have elected four or more income protection and/or specialty products.

“It’s not just that employers are offering more options with the power of choice, it’s that we’re actually able to see the employee behavior—they’re adopting these options and wanting to participate as better health care consumers,” says Misty Guinn, director of customer advocacy at Benefitfocus.

And employers are meeting the demand. An Aon study found a 27% increase in the number of employer clients that offered new or additional voluntary benefits through Aon.

Kim Buckey, vice president of client services at DirectPath, an employee engagement and health care compliance consulting agency, says she expects the trend to continue in the future, especially as voluntary benefits provide an affordable and valuable asset to the total offering. And, she adds, in the age of COVID-19, these attributes are more significant now than ever.

“Voluntary benefits are and continue to be an inexpensive way for employers to broaden their benefits offerings to meet the needs of more of their workforce,” she says. “As employees have become aware of offerings that might offer additional protection for their families during the pandemic, they are likely to be more aware of and be receptive to any other voluntary benefit offerings they might have previously overlooked.”

The added flexibility that voluntary benefits offer is another reason for the high demand, adds Anna Lyons, senior vice president, people and culture, at Alegeus. “When it comes to benefits and simply life in general, employees will always choose flexibility.”

In fact, the pandemic has led more employees to choose voluntary benefit selections that will lead to healthier and happier lives, Lyons notes. “After the events of last year, consumers have become more engaged and educated on health benefits, and they’re taking actions to prove this,” she says.

For example, Lyons says, the rising usage of telehealth benefits during the pandemic has indicated a greater need for accessible, voluntary benefits. 

The Benefitfocus study found the use of  hospital indemnity plans has doubled over a four-year period and even jumped 13% in 2021 alone. Critical illness and accident plans have also increased. “Those are really those financial safety nets for people who are enrolling into an HDHP [high-deductible health plan],” Guinn says. “You provide them with the ability to have a peace of mind for those what-if moments.”

Incorporating such benefits may help employees with their financial wellness and retirement outcomes. For example, more employees are interested in their employers offering emergency savings accounts, which can help them avoid tapping into the retirement savings if they need money unexpectedly. And, according to two 2020 Employee Benefit Research Institute (EBRI) reports, employers also see emergency savings as a hot topic.

Other voluntary benefits, such as whole life insurance, long-term care insurance and the like, can provide future protection for retirement and beyond, Buckey says. “Whole life, of course, typically includes cash value, and long-term care insurance is almost a necessity given the cost of nursing home care,” she says.

While voluntary benefits can help employees, Buckey asks employers to carefully convey to participants how such benefits can work in concert with the existing “standard” benefits offerings. For example, plan sponsors should describe how hospital indemnity and critical illness coverage, plus buy-up long-term disability insurance, can provide an additional source of income should an employee become ill or injured. This type of education might increase both employee interest and plan enrollment, she says.

However, she warns plan sponsors to be cautious about promoting voluntary benefits instead of just providing education, the first of which could result in the plan being subject to the Employee Retirement Income Security Act (ERISA).