Pet insurance, vision insurance, identity theft insurance. A growing number of employers are offering these and other types of voluntary benefits as they look for ways to recruit and retain employees and improve worker well-being.
Leigh Stepan, CEBS, principal of Leigh Stepan Consulting in Plymouth, Minnesota, and Steve Clausen, senior vice president and health and benefits practice leader at Aon Hewitt in Minneapolis, Minnesota, discussed voluntary benefits and how national retailer Target Corporation expanded its offering during their presentation “The Age of Individualized Benefits” at the 36th Annual ISCEBS Employee Benefits Symposium in September.
“Voluntary benefits have become a necessity to attract and retain individuals in an organization,” Clausen said.
As new generations of employees enter the workforce and costs of providing benefits increase, employers are feeling pressure to get more creative with their benefits, he said. Those new employees have different priorities and may demand a benefit package that is tailored to their individual needs.
Employees typically pay the full cost of voluntary benefits, although some employers also pick up part of the cost. Advantages to employees include lower prices because of their employer’s buying power and the discipline of paying for the product through a payroll deduction. In some cases, vendors provide a waiver of evidence of insurability, which means employees who may not have been eligible for coverage previously can now get coverage.
A number of factors caused Target to evaluate its menu of voluntary benefits, said Stepan, who formerly was the director of benefits at Target.
Following implementation of the Affordable Care Act, Target employees who worked fewer than 30 hours per week were no longer eligible for health care coverage. Increasing numbers of employees are enrolled in high-deductible health plans (HDHPs) but may not have the financial wherewithal to cover a large deductible if needed. Employees also were expressing an interest in supplemental insurance coverage, likely because of heavy television advertising by insurer AFLAC.
After two requests for proposals (RFPs) and an employee well-being analysis, in 2016 Target officials rolled out an expanded voluntary benefits program that included supplemental medical benefits (with options for critical illness insurance, hospital indemnity insurance and accident insurance) and identity theft insurance. The company also enhanced its legal benefit.
“We would have loved to have rolled out pet insurance and roadside assistance, but we really didn’t want to do too much all at once and overwhelm people,” Stepan said. “We wanted to roll out the products that we thought were most important first.”
The new benefits offerings brought more employees into the benefits fold because they were available to anyone who worked 20 hours a week or more.
During initial enrollment in 2016, 12% of eligible employees purchased accident and critical illness insurance. Nine percent of those eligible enrolled in the hospital indemnity plan, and about 5% bought identity theft coverage.
While the company hoped for larger enrollment numbers, “the people who needed the benefits are the ones that really took it,” Stepan said. Employees in the aged 26-40 bracket enrolled in the critical illness and accident insurance at significantly higher levels than older employees.
Company officials believe word-of-mouth advertising from employees who have claims paid through the coverage will increase enrollment over time.
The new benefits fit into Target’s overall well-being strategy, Clausen said. “Members could buy a plan that would help the fill the gap in scenarios that were not planned,” he said. “It felt like a more holistic approach to the overall team member.”
Employers considering voluntary benefits will find there are many options available, Stepan noted. When evaluating those options, “think about what the vast majority of your population needs and wants.”
Kathy Bergstrom, CEBS
Editor, Publications at the International Foundation