Merging markets and delivery: Core and voluntary/worksite employee benefits
By BenefitPlace.biz - BPTradeshow.com
BenefitPlace / BP Trade Show
All employee benefits are becoming voluntary. What I mean by this is that while employer sponsored plans remain the main portal for individuals to gain access to insurance related plans, programs and services, individual choice is becoming more prevalent.
Historically there were two types of employer based plan designs that often were not integrated — core and voluntary/worksite plans. To gain integration, cost-savings and an improved benefit design, employers and brokers are breaking down these barriers.
To accomplish these changes the following steps are required:
Understanding core benefits
In the past employers generally worked with brokers to design a plan that was selected and paid for by the employer, i.e., health insurance, term insurance, dental and vision plans, long term disability, accidental death and dismemberment insurance, and term Insurance.
Employees and their families are now being asked to select among a variety of plans and to contribute a substantial portion of the premium. Employees are often provided an opportunity to opt-out of the plan.
Once referred to as payroll deducted plans, employers generally worked with brokers and agents of specific insurers to select a menu of plans to be offered to the employees on a voluntary, payroll deducted basis. The plans included short term disability, accident, critical illness, cancer, hospital income, life, dental, vision, limited benefit health, pet, legal, discount and other insurance and non-insurance-based choices.
Generally, a limited number of plans were offered the 1st year with additional plans in the following enrollment periods.
Over the past several years, the distinction between core and voluntary/worksite plans has been disappearing. Employers are offering their employees a menu of choices including both the traditional core and the voluntary/worksite benefits during a specific enrollment period when they are offered both their core and voluntary/worksite choices.
In most, if not all, cases the employees must contribute to the premium/cost of plans, programs and/or services. The employee contribution may include:
- Paying a portion or percentage of the cost
- Paying the full cost of the pans, programs and/or services offered
- Utilizing benefit dollars/credits provided by the employer after which the employee must pay the remaining cost off the plans, programs and/or services they select from the menu of defined benefit choices — a defined contribution plan.
- Section 125 (POP) plans (pre-taxing the employees contribution to qualified plans).
- Medical reimbursement accounts (pre-taxing anticipated qualified out-of-pocket expenses).
- Dependent care reimbursement accounts (pre-taxing the cost of qualified dependent child and adult care.
- Transportation reimbursement accounts (pre-taxing the cost of qualified transportation and parking expenses).
- 401(k) and other qualified retirement plans.
The employers and their brokers either handle the education, communication, enrollment and data management processes internally or work with a professional enrollment company. Some of the traditional voluntary/worksite insurers may provide these services with some limitations. It is extremely important that the enrollment process is handled on an unbiased basis.
Many employers and their traditional core benefit brokers have been slow to understand and embrace these changes. The reasons are fairly simple:
- Comfort levels: Many traditional core benefit brokers are not comfortable with and do not know how to evaluate and compare voluntary/worksite plans.
- The process: The enrollment process for traditional core benefits did not require as great a focus on the education, communication and enrollment process as when introducing choice.
- Choices: The choices of plans, programs and services — as well as the number of carriers/providers of the traditional voluntary/worksite plans — have increased dramatically. Many branded core benefit insurers have entered into this lucrative market. The employers and their brokers find it difficult to evaluate what differentiates the providers and their plans, programs and services. Old spread sheet methodologies often do not apply.
- Fallacy: Many core benefit brokers thought that the introduction of voluntary/worksite plan choices would diminish their sphere of influence and commissions.
- Fear: Employers and brokers feared that the employees did not have the capacity or desire to make educated choices to protect their individual and family's wellbeing and piece of mind.
- Misunderstanding: A lack of understanding about the role of TPAs and enrollment companies and how they are compensated confused the employers and brokers.
- Have little experience with core benefit plans.
- Have little or no contact with the core benefit broker community.
- Prefer separate one-on-one enrollments for their specific plans.
- Generally represent one specific insurer/provider for the voluntary worksite plans.
- Employers: The cost of benefits has become prohibitive as well as the time required to make specific plan, program and service choices for the employees. Shifting the decision-making processes, as well as the cost, to the employees is becoming more and more attractive. Many employers are beginning to recognize that it is cost-effective and efficient to empower employees to become consumers.
- Brokers: With time they are changing. The lines separating core benefit and voluntary/worksite brokers are breaking down. As brokers become more familiar with the alternative plans and employers demand the integration of the plans — combined with the opportunity for brokers to generate more commissions — the brokers are embracing the new opportunities to expand their markets and revenues.
- Employers and brokers: The functions of the TPAs and the enrollment companies are becoming better understood and appreciated. Advancements in technology have brought the costs down while the marketing efforts by these sectors of the market have increased.
- Employees: Due to advertising, the Internet and experience the employees appreciate, want and at times demand choice. The individuals and their families embrace the opportunity to select the plans, programs and services they need and can afford to protect themselves against risk and to enhance their lives.
- Meeting needs: Evaluating the employees needs and financial capacities.
- Benefits: Determining the best-of-class of plans, programs and services choices, as well as the carriers/providers, is imperative. Note: No matter what they claim, no one carrier/provider is the best and most cost effective for everything.
- TPA: Depending on the number of employees, industry, number of locations and requirements specific to the plan design, a TPA should be selected.
- Enrollment: Selecting the enrollment company — if outsourced — and the type of enrollment that is best suited for the employer's and employees’ convenience and needs.
- Employer's contribution: Determining the employer's total benefit contribution and how it will be allocated by class of employees and among the plan choices is important for budgeting.
- Payroll: The payroll staff or payroll company selected must understand how the employer's and employees’ contributions are structured as well as the process for differentiating the pre-tax deductions.
- Enrollment: Scheduling a time for the education, communication and enrollment process is critical. This should be at a time when the employer, the employees and their families have adequate time to focus on the benefit choices. Holiday seasons are not the best time.
- Spheres of influence: Having the management, department leaders, unions, etc. buy into the benefit plan is extremely important. Their support and participation is critical for gaining the confidence and participation of the employees.
When all of the above steps are followed by the employer and the brokers, the education, communication and enrollment process should be relatively smooth. Points to keep in mind:
- Information: Materials should be distributed to the employees explaining the plan design and differentiating each of the plans, programs and/or services. An explanation of how various plans integrate is important and should be provided by the brokers.
- Time: Employees need and deserve time to make decisions.
- Beyond the employee: Families should be included in the decision making process.
- Changes: Time should be permitted for making changes.
- Documentation: The time between the end of the enrollment period and the effective date should be adequate to complete paper work, for data management and to meet the needs of the providers.
- Problem solving: "Pulse" meetings should be scheduled with the employer, brokers, TPA, enrollment company, and other involved parties to monitor the progress and solve minor problems before they become major.
- New eligibility: Enrollment periods for new hires and anyone with a change in status should be scheduled.
- The pay day: When the first paycheck goes out reflecting the employee's benefit choices, the broker(s), enrollment company, TPA, payroll and insurers should be available to answer the employee's and their family's questions and concerns.
- Feedback: Encourage feedback from all parties to improve the plan design and to gain a greater return on the employer’s and employees’ invested benefit dollars.