Employers Expanding Voluntary Benefits, Post-ACA

November 20, 2012 (PLANSPONSOR.com) In a post-Affordable Care Act (ACA) environment, employers are expanding voluntary benefits and shifting benefit decisionmaking to employees.

As a way to maintain or increase employee benefit offerings while controlling costs, employers are expanding the range of employee-paid voluntary benefits offered to employees. Three in four employers report that their top reason for offerings voluntary benefits is to expand the benefits options available to their employees, according to a Prudential white paper, “Optimizing Employee Benefits in the Post-Health Care Reform Environment.”

Within the next two years, 71% of finance executives indicate they are likely to replace some employer-paid benefits with voluntary benefits, and 69% indicate that they expect to expand the range of voluntary benefits offered.

In a post-ACA world, a trend should gain traction for employers to differentiate their benefits by offering voluntary benefits such as life, disability and critical illness insurances, said Jim Klein, president and CEO of the American Benefits Council (ABC), during Prudential’s “Health vs. Wealth” media briefing on the data. “This is really a pivotal time in the life of employee benefits,” Klein said. “As benefits become more similar … health care could become more commoditized.”

A CFO.com research survey found 79% of finance executives agree that employee benefits are critical for attracting and retaining employees, and 76% said employee satisfaction with benefits is critical for their company’s success.

Dallas Salisbury, president and CEO of the Employee Benefit Research Institute (EBRI), said the ACA will increase employees’ expectation of company benefits, as well as the education surrounding them. Even if employees choose the insurance exchanges, plan sponsors can still play a role in educating them on how to best select benefits, he added.

Plan sponsors should personalize their benefits-related messages to employees, taking factors like age and gender into consideration. More than 80% of people want a personalized experience when it comes to financial advice, said James Gemus, senior vice president, group life and voluntary benefits at Prudential Group Insurance. 

Employees particularly need assistance choosing voluntary benefits because they find it difficult to choose benefits based on possible future events, Gemus said. For example, about half of surveyed individuals say life insurance is too complicated to purchase. Voluntary benefits like disability are also vital, as Salisbury pointed out one in four people in their early 20s will experience a period of disability by age 67.

Voluntary benefit communications and education should include true stories and case studies that establish the need for protection against key risks and connect those needs to specific solutions, according to Prudential’s white paper, "Voluntary Benefits: A Critical Tool For Improving Employees’ Financial Wellness."

Communication and education may help employees overcome the notion that life insurance is more relevant for covering funeral costs and final expenses than for replacing a lost income, the white paper said. Education about the importance of voluntary benefits is crucial to maintain financial wellness, Salisbury said, as LIMRA research indicates that 70% of U.S. families would be financially challenged if the breadwinner died or became disabled.

According to Prudential’s research, employees most prefer to receive their benefits communication information via workplace email (55%), followed by group meetings or seminars during the work day (49%). Coming in last is webinars at 13%. 

Post-ACA Health and Wellness 

Another trend in the post-ACA world is an increase in the development and promotion of wellness programs. Wellness initiatives can improve employees' health, which in turn reduces health care costs and improves productivity.

Nearly seven in 10 chief financial officers agree that promoting healthy behaviors and building a culture of health is a priority within their companies, according to Prudential's white paper on optimizing employee benefits. To that end, 47% of employees are currently increasing their use of wellness programs. According to the white paper, a key provision of the ACA is expected to accelerate this trend because employers will be able to vary health care premiums by up to 30% based on whether employees participate in the wellness programs.

A third trend expected as a result of ACA is the shifting of more responsibility for health care costs to employees. To restrain the growth of health care benefits, nearly two-thirds (65%) of finance executives are likely to shift more responsibility for health care costs to employees, according to the white paper.

Employers are increasingly offering account-based health plans (ABHPs) that pair a health insurance plain with a savings account as a way to give more responsibility to employees. To save costs, employers generally offer high-deductible health plans (HDHPs), and employees pay part or all of their deductible through their savings account. By 2014, 33% of employers are very likely to offer an HDHP as their default plan option, and 26% are very likely to offer it as their only plan option, the white paper said.

Despite changes that may occur in a post-ACA world, "employers [and employees] still value having employee benefits," Gemus concluded.