Supplemental insurance a growing benefit option
Supplemental insurance a growing benefit option
Coverage available at little or no cost to company
Attention benefits managers: How would you like to give your employees access to a wide range of new benefits at no cost to your employer?
Sound too good to be true? Not according to an industry group of employee benefits specialists, who note a growing demand for voluntary benefits, such as supplemental insurance, among companies nationwide.
A recent study conducted by the Brookfield, WI-based International Society of Certified Employee Benefit Specialists (ISCEB) showed that employers representing 73% of the respondents make voluntary benefits available to employees, while another 17% indicate voluntary benefits are under consideration. (See chart, p. 7.)
ISCEBS defines voluntary benefits as individual or group insurance products that are available for purchase by employees at the work site.
"The environment is ripe for the growth of voluntary benefits," says Melody Carlson, associate director of research for the International Foundation of Employee Benefits Specialists, also of Brookfield, WI, which conducted the survey of society members. "Employees have become accustomed to cost-sharing, to a greater extent; this is nothing new," she observes. "But employees expect more and more [coverage] opportunities from their employer."
Another factor, she notes, is the busy 90s lifestyle. "People have neither the time nor the inclination to go shopping for additional coverage when they can just pay for it through a payroll deduction premium," Carlson notes.
In addition to dental coverage, which remains the most popular supplemental health option, other coverages commonly available include vision, prescription drugs, disability income, accident expenses, and a number of riders covering catastrophic and/or long-term illnesses.
One of the reasons supplemental health policies are so attractive to employees is that they provide a great deal of flexibility, says Kathelen Spencer, senior vice president and deputy counsel for AFLAC Incorporated, a Columbus, GA-based provider of supplemental insurance. Spencer says that accident and disability coverage account for more than 55% of AFLAC’s new sales.
"These types of coverage allow employees the flexibility to customize some of their benefits," she notes. Often, says Spencer, they are made available on top of a base plan offered by the employer, and the employee can decide what he or she needs. "For example, a younger employee might choose accident or disability coverage, while an older employee might opt for a cancer product or hospital indemnity."
An additional benefit for both the employer and the employee is that many of these policies can be offered through a Section 125 cafeteria plan. The premium is paid with pretax dollars, so the employee’s taxable income is reduced by the amount of the premium. This, in turn, enables the employer to decrease his or her payroll tax.
"These policies are individually issued, so if you leave your employer, they are fully portable," adds Spencer. "And the premium stays the same." Spencer notes that the payroll deduction premium rate is generally more favorable than what an employee could get if they called an insurance agent.
Wellness benefit a plus
Some supplemental health products, such as AFLAC’s cancer and accident programs, include a wellness benefit for employees. "These provide an immediate benefit," notes Jim Poole, assistant to the president.
These benefits can be anywhere from $40 to $70 and can be used for screenings or diagnostic tests (such as prostate screenings or mammograms) once a year, Poole explains. "This encourages screenings and raises awareness for age-appropriate prevention. Plus, it can lead to early detection," he notes.
They can also prove very cost-effective. "An annual family policy for cancer can run from $200 to $350," he says. "If everyone has two screenings, you make your money back."
Speaking of money, with employees bearing a larger financial burden for their basic insurance policy, can they afford these extra costs as well? "We think so," Poole asserts. "There are varying pricing levels with various benefit levels; the employee has the option of choosing what they can afford."
Some younger, low-wage employees, however, are even opting out of employer-sponsored health insurance.
Popularity will grow
According to 78% of the ISCEBS survey’s respondents, the popularity of supplemental insurance coverage will grow in the future. Spencer points to increasing cost shifting as a major factor. "And with the managed care environment, people still have the desire to go outside their plans if it’s warranted, and having some extra cash benefits they can apply directly will give them the ability to do that." The benefits are paid directly to the insured, she notes, "So the employee can apply them to whatever the greatest need is at the time."
Employers interested in investigating supplemental insurance carriers can contact their state insurance department, says Spencer.
"This tends to be a niche market, with supplemental carriers only involved in supplemental insurance," she notes. "For example, we are not involved in major medical." Other supplemental carriers include Colonial Life & Accident, a division of UNUM based in Columbia, SC; Conseco-owned Capital American, in Carmel, IN; and Liberty National, in Birmingham, AL.
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