Voluntary, or supplemental benefits, are defined as those purchased at work, through payroll deduction and primarily paid for by the employee. They are one of the fastest growing segments of the insurance industry, as employees want and need the protection afforded by these benefits.
Supplemental plans, such as Cancer, Disability and Accident, are designed to supplement an employee’s existing medical plan and cover the extra expenses not covered by the primary insurance. These extra expenses include: deductibles, co-pays, experimental treatment, out-of-network charges, transportation, lodging, lost income, home recovery expenses, and COBRA insurance. Major medical plans are excellent coverage but advances in medicine and care place a strain on benefits provided under those plans.
These policies work well because, unlike major medical plans (which pay the doctor and hospital); supplemental insurance pays the policyholder directly – in addition to and over-and-above major medical benefits. Supplemental plans have no coordination of benefits provisions, and policyholders can use the money as they see fit. The policies are generally portable, very flexible, and non-taxable. They allow employees the ability to choose a coverage level and corresponding price best suited to their needs.
Today nearly 66% of all employers offer at least one voluntary benefit plan, and the percentage is expected to rise. Reasons for the trend include the following:
- Voluntary employee benefit plans are convenient for the employee because the premium is automatically deducted from the paycheck, freeing the employee from having to write checks, pay postage or worry about missed premium statements.
- Voluntary employee benefit plans are flexible. The employee decides whether to participate, who to insure, and which benefits to select.
- Most voluntary employee benefit plans are portable, giving the employee the option of continuing coverage after his or her employment has separated.
- Voluntary employee benefit plans are normally more liberally underwritten and sometime “guaranteed issued,” making it easier for the applicant to qualify. In some cases, the employee will obtain coverage when he or she would be uninsurable in the individual market. Typically, no physicals or medical exams are required.
The U.S voluntary worksite market is nearly 650,000 businesses, with at least 10 employees offering at least one voluntary benefit.
Employees want the security of supplemental insurance. Fundamental changes are taking place in the workforce that alters the way companies relate to employees. Often there is fierce competition for qualified workers. Today’s employees place a high priority on not only compensation, but also on a company’s overall benefit package. Having flexible benefit plans that can be tailored to an employee’s individual needs makes an employer more attractive and, thus, more competitive in the marketplace.
The reason for the surging interest in voluntary benefits is obvious: Workers appreciate the convenience and value of purchasing insurance in the workplace and the value these policies bring to them and their family.
The following statistics from a 2007 survey illustrate what surveyed workers stated were the advantage of voluntary benefits:
- 1. 86% cited the advantage of pre-taxing and saving tax dollars
- 2. 76% cited convenience
- 3. 75% cited group insurance premium savings
- 4. 71% cited relaxed underwriting and obtaining insurance without a medical exam
Still employees want more voluntary benefits. 52% of employees in the survey stated they live paycheck to paycheck. Workers need extra insurance protection, because they have little left over or discretionary income for unexpected illness or loss of income for their families and themselves.
This is particularly important when one considers the article, Illness and Injury as Contributors to Bankruptcy, a Harvard Law School study which found that over half of all personal bankruptcy filings in America are caused by unexpected illness. Consider the following facts uncovered by the study:
- The average out-of-pocket cost for illness was $11,854 and for cancer it was over $35,000
- The average debtor was 41 and had at least some college.
- Over half of those who filed for bankruptcy had health insurance.
A new term resulted: Medical Bankruptcy…