Today, more employers than ever before are offering at least one type of voluntary employee benefit. The growing interest in voluntary benefits reflects tight human resources budgets, the changing face of employer-sponsored health insurance, and the varied and multi-faceted needs of a workforce that is ever-growing in diversity.
A study from Eastbridge Associates found that, overall, 66% of employers offered at least one voluntary benefit in 2009, compared with 54% that did so in 2006. The growth in voluntary benefits offerings has been especially noticeable among the smallest employers (10 - 100 employees), with 65% offering at least one type of voluntary benefit in 2009, compared with only half that did so in 2006.
A separate survey from the International Foundation of Employee Benefit Plans characterizes voluntary benefits as a "fundamental part of employers' benefits packages, a "significant part of plan sponsors' strategic benefits approach. In that study, 84% of the surveyed employer group offered voluntary benefits.
What's making voluntary benefits more popular and more important? Here are some of the reasons-
Tight benefit budgets have constricted the growth of employer-paid-for benefits. Voluntary benefits enable workers to have access to coverages that are popular with employees-such as vision and dental-when the employer can't afford to include these in the basic benefits package, either on a contributory or noncontributory basis.
The shift from employer paternalism to employee responsibility that began with the introduction of 401(k) plans has continued in full force, with employees now firmly in control of providing for their families' financial security. Thus, popular voluntary benefits include supplemental life insurance, disability insurance and long-term care insurance-coverages that come into play when potentially cash-draining life events occur.
In workplaces where consumer-directed health plans are offered, employees who are enrolled in these plans may turn to voluntary supplemental medical coverages to fill in the gaps left by these plans. Vendors have developed products that do just this, helping employees who buy the coverage to offset the higher deductibles or coinsurances of the underlying plan.
Other types of supplemental medical plans have long been offered on a voluntary basis and they continue to play a role. These include plans that cover the indirect costs of an injury or illness, such as critical illness insurance that pays a cash benefit upon the diagnosis of a life-threatening disease or condition, and which can be used by the insured, or the insured's survivors, for any purpose they see fit; disease-specific insurance, such as cancer insurance, that may provide coverage beyond the primary medical plan for treatments associated with the disease; and hospital indemnity insurance, which supplements the primary plan in the event of an illness that requires a hospital stay.
A primary driver of the voluntary benefits market has been the growing demographic diversity of the workplace, and the recognition that today's workers have a wide range of needs. Voluntary coverages that address this include long-term care insurance, financial planning, pet insurance, a sampling of life insurance products, and childcare and eldercare assistance.
Another marker of today's workforce is how time-pressed employees are, and certain types of voluntary products directly address this reality. For example, by bringing products that most individuals need-such as auto insurance and homeowners/renters insurance-into the workplace, employees save the time of researching these necessary coverages on their own, and also enjoy the convenience of paying for the
insurance through payroll deduction and the cost savings of a group rating.
Though the voluntary insurance marketplace has been around for some time, it is growing in importance for the reasons noted above. Today, voluntary benefits are more than an accessory to an employer's core benefits; they are a seamless, strategic and essential component of a total compensation package.
