Posted: February 5, 2010

The reasons for keeping or adding voluntary benefits like term life, vision, dental, long-term care and disability insurance in 2010 may surprise employers and employees. Talk about rising health plan costs and budget cuts in a sluggish economy has left many assuming that such benefits are a ploy to reducing employer-paid health care costs, but that is not the case from what we are hearing from clients and our industry. Just as important has been a desire to help employees afford growing financial protection needs, mitigate the potential for coverage gaps and offer more choices for our diverse workforces.

According to the International Foundation of Employee Benefit Plans and Employee Benefit News survey completed in September, 68 percent of the 833 employee benefit professionals provided voluntary benefits plans to provide access to a greater array of benefits and support employee choice and flexibility. Voluntary benefits allow employees to add valuable coverage to their benefits package at economical group rates while employers are able to enhance employee benefits at virtually no cost.

What's driving this philosophy may be a recession that has forced us to take a sincere look at our employee populations. Long-term care is one of the fastest-growing voluntary benefits in some markets, creating opportunities for the nation's aging 78 million baby boomers to buy an affordable plan. Some voluntary programs are portable, such as life and LTD, at the low group rate, a benefit to those who may still lose a job or for Gen X and Y employees who hope to move on to new employers as soon as the hiring freezes dissipate.

In the same survey, 88 percent of respondents said that portability will continue to be important. Additionally, household incomes reduced by a spousal job loss have made voluntary benefits such as low-cost insurance coverage for employees and dependents attractive. One catastrophic medical event by either spouse could financially wipe out a family's savings. Employees purchase insurance at a cost that may be only minimal to the employer's overhead.

For employers who did cut back on benefits or the share that the company pays, instead of cutting back on the employee payment in 2010, I believe we will see more voluntary benefits as employees can often buy up in their benefit selections. Additionally, benefits such as vision insurance, which is not always part of the core benefits package, can be perceived as a better deal than allocating money to a flexible spending account because there are often network provider discounts on eyeglasses, lenses and frames.

Most employees are likely to seriously consider whatever benefits the employer offers. This reflects the employee's confidence that if the employer is offering the benefit, it must be important. Small businesses dealing with the difficult economic times mean tough choices for owners. Instead of paying for DI, life and dental policies, small business owners are seeing the wisdom of offering those kinds of benefits on a voluntary basis, a la carte-style, where employees can pick and choose and pay for the ones they want and can afford.

Not only does offering voluntary benefits cost small business virtually nothing, it helps level the playing field with larger companies. These programs usually have looser underwriting requirements and at group rates that are lower than if they went out and got coverage on their own.

Assurant Employee Benefits, a highly regarded service provider, reported in November an 18 percent increase in disability, dental and life insurance sales, with the number of companies seeking quotes on voluntary benefits rising 32 percent. Even with such increases, we have to be mindful that the financial impact of 2008 may decrease new enrollments. If 25 percent of employees were selecting a benefit in 2009, it may be 20 percent this year.

So what can benefit professionals do to promote the value of their voluntary benefits plans?