Opportunities depend on tailoring products to employee interests
By Thomas A. McCoy, CLU
Employee benefits brokers have reason to be optimistic at the start of this new year. The need for traditional benefits products remains strong, and employees are expressing interest in newly evolving benefits that will offer more opportunities for plan sponsors to consider.
Early in 2023, a study of 1,000 small and mid-sized businesses (under 500 employees) commissioned by Principal found that almost 80% of those that classified their companies as “growing” said their benefits package improves their ability to recruit and retain employees; 74% of those growing businesses also said it improves productivity.
Among larger employers, recent research by Eastbridge Consulting Group found that those with 1,000-plus employees, where comprehensive benefits packages presumably are the norm, employees expressed strong interest in purchasing additional voluntary coverages. More than a third of those surveyed who did not already own critical illness or long-term care said they were interested in buying them.
Bryan Burke, assistant vice president, product development, Sun Life U.S., foresees “significant growth in supplemental health products for 2024.” He says this strong growth outlook is tied to three factors.
The first is market conditions—an increased consumer awareness of risks. “For example,” he notes, “critical illness has been the fastest growing employee benefits product for well over 10 years. The pandemic has been a significant factor in this growth.”
The second contributor to growth in supplemental health is medical inflation and rising health insurance premiums, Burke says. “It leads, inevitably, to higher out-of-pocket costs for employees. Key factors in overall medical inflation are rising costs of hospitalizations, physician fees and drugs,” he notes.
Finally, Burke says, “The market for voluntary supplemental health products remains very under-penetrated.”
John Thornton, executive vice president, Amalgamated Life Insurance Company and the Amalgamated Family of Companies, is similarly bullish on his company’s suite of voluntary products. He says the overhang of the pandemic experience is exerting a favorable effect on growth prospects.
“Although the COVID-19 pandemic has arguably ended, the way employees view their benefits has permanently changed. They want to be offered products that protect them not only in the near-future (accident and short-term disability) but also for other life events (critical illness and death), which are products that are readily accessible to employees.”
Thornton notes that portable term life insurance has appeal across all age groups. “Dental insurance is often favored by younger generation employees, especially if they have a growing family, along with accident insurance. Younger generations also are more interested in lifestyle benefits such as wellness programs, flexible work schedules and financial education.
“Generation X and baby boomers still in the workforce may be more inclined to purchase health-related coverages, including critical illness and disability coverage, even though a critical illness or a disabling event can occur at any age.
“Our advice to plan sponsors is to canvas their employees to determine which benefits matter most to them, and then build a program around their needs,” says Thornton.
Sheila Sokolski, assistant vice president, product management for Sun Life U.S., says that disability insurance remains an anchor of a benefits portfolio, along with life insurance. “One of the broad trends in disability is that it has become less of a siloed product and more about how it integrates into an employer’s overall absence policy, including compliance with state- and federal-mandated leave,” she says.
During the pandemic, many employers, even smaller ones, started hiring people to work remotely, Sokolski points out. “With employees scattered around in various states, they can be subject to compliance with several different state leave mandates.
“We rely heavily on our brokers to help their employer clients determine an appropriate absence solution based on their workforce demographics and geography,” she adds.
Thornton says the broker’s analysis of client needs, including regulatory compliance, is part of the overall value they bring. “Brokers stay abreast of regulatory changes and, in this way, support their clients’ compliance with employee benefits laws and regulations.
“Brokers also conduct essential research to identify the best products to meet the needs of their clients and their employees. By leveraging their experience, knowledge of market trends and developments, and extensive network of employee benefits providers, brokers are instrumental in building a sound benefits portfolio and securing optimum pricing,” he says.
Coverage for dependents under a benefits plan can be an important consideration for both the employer and employee. Will the company-paid health plan include these dependents? And for voluntary products, will the employee be able to add, and afford to pay for, these dependents?
“Many employers grapple with the question of whether they should extend company-paid health benefits to their employees’ family members,” says Thornton. “Given today’s high healthcare costs, this decision is not being made lightly, particularly by small business owners. Many look at what their competitors are doing when making this decision.”
For voluntary coverages, Thornton says, “we are seeing more highly compensated employees selecting options to cover their family members, especially those with younger dependents. For portable term life, accident and dental insurance, for example, many extend coverage for their spouse and children.”
“One area where we are seeing a lot of interest in employees adding dependents is mental health,” says Sokolski. “We are getting more requests for mental health services for family members, specifically behavioral health for children and adolescents, provided under supplemental health plans.
“EAPs (Employee Assistance Programs) traditionally will cover family members, but a lot of employers are looking for enhanced mental health services.”
Thornton has seen little evidence of employers offering traditional voluntary products on an employer-paid basis. “Some of the very large employers may be, but their focus tends to be more oriented toward non-insurance benefits. Verizon, for example, is offering a stipend that employees can use to purchase personalized benefits such as elder care, pet care or a fitness program.”
Burke says sometimes employers have been willing to pay for a base amount of a coverage normally offered on a voluntary basis. “We are starting to see employer contributions on critical illness, where they file a small base benefit amount, like $1,000 or $3,000 and then offer the opportunity for the employee to buy up at higher amounts.
“Dental coverage is an area that is ripe for employers to make contributions, but employees are paying more of the premium, and when they pay more of the premium they can demand richer benefits, and lower deductibles and out-of-pocket costs.”
According to MetLife’s most recent Employee Benefit Trends Study, “being happy” is the most important aspect of employees’ work experience (followed by “doing meaningful work” and “being successful”). More than three quarters (76%) of workers who understand their benefits are happy, and 82% believe their benefits give them a greater sense of stability—versus only 47% and 52%, respectively, who don’t understand their benefits.
So, it is little wonder that the industry is laser-focused on communicating benefits in ways that workers can understand and enable them to make choices with confidence. For Sun Life, Burke says, the strategy is to communicate “early and often in ways that work for the employee—including online, on the phone and through social media—wherever and whenever they are most comfortable.
“Most important is personalization. People want to know how the benefits apply to them. We use lots of hypothetical situations for product illustrations. They also want a ‘one stop shop,’ where they can access all their benefits. They can enroll online, but they also have timely access to live benefits counselors through either a live chat or by a phone appointment.
“It’s also important that we continue our benefits education and access to resources throughout the year,” he adds. “We want to make it easy for workers to make changes when there is a life event that triggers a need.”
Thornton also stresses the importance of year-round benefits communication by plan sponsors using a variety of channels. “These include webinars, on-site seminars, mobile apps and employee portals. In addition, we are offering financial literacy programs to help employees better understand what each product does, so they can make wise benefit selections.
“During the enrollment period we provide product specialists on site at their facilities to answer employees’ questions.”
Thornton believes that an important benefit product trend, as we look to 2024 and beyond, can best be summarized as a “focus on making certain that the insurance and benefit offerings provided are aligned with what employees want.” He cites as evidence a 2022 survey conducted by Transamerica’s Center for Retirement Studies to illustrate the urgency of this objective.
It found that 69% of employees considered a workplace wellness program to be “very” or “somewhat” important, compared to 28% of employers. For life insurance, the percentages were 73% for employees, versus 28% of employers who considered it important. For disability, more than three quarters (77%) of employees rated disability insurance as somewhat or very important, compared to 26% of employers.
As brokers work with plan sponsors in the year ahead, one opportunity and challenge will be to guide them toward products and services that align with what’s important to their workforce.
For more information:
Amalgamated Life Insurance Company
Sun Life U.S.
Thomas A. McCoy, CLU, is an Indiana-based freelance insurance writer.