The Problem with HR Pitching Voluntary Benefits.....

Remember when critics were lashing out at the state of California and Arnold for aggressively pitching Long-Term Care to its residents.

It seems as if many expect state governments to avoid being a marketing channel, even if the product is in the state's own interest.

Some would say the same burden should apply to employers.

Warning - HR Capitalist opinion ahead which many Benefit professionals will not agree with....

Topic - "Voluntary Benefits", defined as benefits in which the employee pays all of the cost, provide employees with options for benefits and insurance coverage they might not otherwise be able to afford.  The affordability of such benefits is usually enhanced by the face that employees can often pay for voluntary benefits with pre-tax dollars.

Sounds noble, right?  Here's are a few problems that are often overlooked:

-Voluntary benefits usually include benefit classes like supplemental life insurance, long-term care and auto/property insurance that can have wildly variable cost structures based on the provider and the demographics that are insured.

-HR shops don't do RFPs that closely canvas each class of voluntary benefits.  They usually are hit by a comprehensive provider like an ADP, which provides a package of voluntary benefits with some high margin products built in.  If an HR shop doesn't do a comprehensive provider of the benefits, then they are usually assaulted by the bank, or insurance agent with the most aggressive marketing strategy.  In that scenario, HR people are often bad at saying no.

-Everyone, including the employee and the voluntary benefits provider, loves the concept of voluntary benefit costs being automatically deducted from their paycheck.   Employees love it for the convenience and the fact they don't have to track it.  The providers love it because they don't have to collect money.  Once the automatic deduction is in, it's hard to get out.

Put all that together, and it's complicated.  Here's the biggest issue I have, and one of the reasons I haven't opened my shop up to voluntary benefits since I arrived at my current company - I feel responsible for the solicitation.  If I'm going to open up our employee base to a voluntary benefit, for which the employee is going to pay 100% of the cost, I feel like I am VOUCHING for its quality and value across the marketplace.

And there's no doubt that employees expect you to be looking out for their best interests.  So, they take the voluntary coverage, if available, often without shopping. 

If I am going to allow an auto insurance product to be marketed to my employees through our normal channels, I feel like I need to say the quality/price combination is the best in the marketplace.   And that, my friends, is hard to do.

And that's why I traditionally have said no to the concept of voluntary benefits. 

Comments

[Jennifer Benz]

Hi Kris, Great post. I do think prudent companies can do their homework on voluntary products and make sure their employees are both getting a good deal and getting products that are appropriate for their age/demographics/family situation. But, as you explain, it does take a whole lot more work on the part of the employer up front and more education/communication when the products are rolled out. When given the time/resources needed, voluntary benefits can be a big value-add for employees and their families. If not, they are a big win for the carriers at the expense of the employees.

Too often, employers skimp on the communication of voluntary products and let the carriers run the show, giving them the opportunity to aggressively market to employees. The better approach is to have voluntary benefit communication integrated into overall benefits communication so employees can see how they fit in the big picture and what's appropriate for them.

[Mark Kaczmarek CLU, ChFC, CFP, RHU, REBC]

Hi Kris,

I agree with your basic ideas, however this can be overcome with a quality trusted advisor. Employer's need to remember that ERISA will no longer define a benefit as "Voluntary" (even individual worksite products) if they are to involved in the negotiation of pricing and marketing of the products. That's not a problem, provided the employer is aware that they will need to provide a Summary Plan Description and often file Form 5500's.
A quality advisor can perform this Due Diligence and avoid many of the "Employer Sponsored" plan responsibilities.

[Jim Kisela]

Kris:

You raise some good points. I would add from my experiece that the compensation program for the on-site enrollers became a key issue.

When enrollers are paid a percentage commission on each product sale, I found that the "communication" meetings quickly turned into hard sell, arm twisting sessions that the employees resented tremendously.

I solved that by insisting that the enrollers be paid completely separately from sales. On top of that, the continuation of the program was contingent on a very high "net promoter score" from the employees.

[Cynthia H. Arendash]

Hi Kris:

You raise many points. HR shops don't do RFP's, but your enrollment company/Advisor can. I was you six years ago. As a benefit broker, I recognized healthcare and ancillary benefits as the only employer-paid benefits. Everything else was “sham” insurance.

I was forced to deal with Worksite benefits at my 5,000 life client. They had an enrollment situation that needed immediate attention. They forced me to understand the enrollment, communication, and inner workings of these benefits.

Since then I have been a converter. Employees are being offered benefits that they would in most cases never qualify for on their own. A person making $24,000 a year can insure their ability to earn a living and lock those rates in at today’s age. That is huge. If they visited my office on their own, they would pay hundreds of dollars more and may not qualify because of health conditions (no Guarantee Issue) or minimum policy amounts.

Enrollment firms can help deliver your message or enroll in other products. For years my client could not pass discrimination testing on their 40lK resulting in dollars being returned to their employees. My company enrolled 1,249 employees into their 40lK plan and offered worksite benefits as the way to fund the enrollment.

Brokers are not sitting at the kitchen table and explaining insurance options anymore. You are their only option. But if you pick the right person, they will help enhance your company’s benefit portfolio. If you pick someone with healthcare knowledge, they will tend to give you overall benefit advice, not just throw a product at you.

As you can tell, I am passionate about voluntary benefits. There is someone like me in every state of this country. You just have not found the partner you are looking for.