Voluntary Benefits for the Multi-generational Workforce

THE ROLE OF THE VOLUNTARY BENEF I TS CONSULTANT

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S O C I E T A L T R E N D S & V O L U N T A R Y B E N E F I T S

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voluntary benefits for the multi-generational workforce In a Cigna survey of American workers, 44% of respondents said they worry about how they might pay for medical costs not covered by their medical plans. Voluntary Benefits can ease that worry.

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a new age of work and workers

A NEW AGE OF WORK AND WORKERS

THE LINGERING ISSUE OF HIGH-COST HEALTHCARE

People are living and working longer. Even though most Pre-Boomers and the oldest Baby Boomers have already retired 1 , it’s not unusual for a workforce to span 45 years or more. The wide variance in age poses major challenges for employers. A 60-year-old, a 40-year-old and a 20-year-old working in the same organization will have very different expectations and views of the workplace. It follows that health and welfare benefits will mean one thing to one demographic and something else to another. Let’s review the three major working generations—Millennial, Generation X and Baby Boomer—and their challenges: Millennials, saddled with debt, worry about catching up. Millennials have surpassed Baby Boomers as America’s largest living generation. 2 But unlike their older colleagues who’ve enjoyed relative job security, many Millennials began to enter the workforce in 2007 during one of the worst economic downturns in history, and then faced years of unemployment or under-employment. Saddled with student loan debt and struggling to make ends meet, many Millennials moved back in with their parents. While unemployment in this demographic has eased recently, it has had a lasting effect. Millennials are bringing their financial uncertainties to work, and they’re asking their employers for help. 3 Gen X’ers, caregivers for adult children and aging parents, worry about keeping up. More than 60 million Americans live in multi-generational homes. 4 Step-relatives, same-sex couples, parents, grandparents, adult children and younger dependents, or a combination thereof, may reside under one roof. At the epicenter of this societal shift is the Gen X’er who’s caring for family members on both sides of the generational divide. Instead of downsizing as they age, some Gen X’ers are upsizing their homes and taking on greater financial obligations to accommodate their extended families. 5 In addition to healthcare benefits and 401(k)s, they need specific insurance coverages that will help them provide for their loved ones and protect their finances. Baby Boomers, facing retirement someday, worry how they’ll end up. This demographic largely avoided student loans due to the expansion of public education, and except for a few economic downturns through the decades, many enjoyed stable employment. 6 But Baby Boomers are working longer primarily due to current and future income insecurity. Some who’ve reached the age of retirement didn’t save enough and can’t live on Social Security alone. 7 Others work because they’re still paying off a mortgage. Some continue employment because they thrive on the mental stimulation and social connection their jobs provide. Whatever their reason for staying on the payroll, Boomers need employee benefits that will protect them during their extended lifespans. A study by Prudential reports that a majority of employees, and that means employees of any age, are not fully prepared to meet their financial needs in the face of four key risks 8 : 1. Loss of income due to illness or injury 2. Out-of-pocket medical and non-medical expenses 3. Outliving assets in retirement 4. Loss of income due to premature death

5 KEY CHARACTERISTICS OF THE GEN X’ER

4 KEY FINANCIAL SHOCKS FACING RETIREES

THE GENERAT IONS

Pre-Boomers (born 1925-1945)

Baby Boomers (born 1946-1964)

1 Gallup, “Only a Third of the Oldest Baby Boomers in the U.S. are Still Working” 2 U.S. Census Bureau/Pew Research Center 3 Advisor Perspectives, “Millennials and the Labor Force” 4 Pew Research Center, “FactTank” 5 Forbes, “The Undetected Influence of Generation X” 6 The Balance, “Baby Boomers in the Workplace” 7 AARP, “Boomers Boosting Economy” 8 Prudential, “How Well Protected Are Employees Against Key Financial Risks?”

Generation X (born 1965-1980)

Millennials (born 1980-1994)

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T H E R O L E O F T H E V O L U N T A R Y B E N E F I T S C O N S U L T A N T

The good news: the economic tumult that began in 2007 has subsided. The bad news: rising healthcare costs are continuing to squeeze the employer’s budget. Though medical cost increases have slowed in recent years, insurers continue to report trends between 7% and 9% 9 . Prescriptions, in part fueled by high-cost specialty drugs, have escalated the pace of healthcare spending. The future of healthcare reform also stirs uneasiness about benefits in general and the high cost of medical care in particular. To ease the burden of rising healthcare costs, employers are turning to Consumer Driven Health Plans (CDHPs), which shift more of the financial responsibility of healthcare to employees. But this shift is problematic for employees—their financial burden has increased but their wages aren’t keeping pace. In fact, healthcare spending continues to outpace wages. CDHPs typically include High Deductible Health Plans offered along with a Health Reimbursement Account (HRA) or a Health Savings Account (HSA), both of which are designed to help employees bear the burden of a higher out-of-pocket responsibility. However, HRAs and HSAs often don’t provide adequate financial protection, especially for employees who are afflicted with a serious illness, such as cancer, heart attack, or stroke, or for a major surgery like an organ transplant. So despite an improving economy, employees worry about the impact of an illness, accident or hospitalization on an already stressed household budget. Recent research data validates these concerns: QQ More than two-thirds of Americans are living from paycheck to paycheck. 10 QQ One in four 20-year-olds will become disabled before age 67. 11 QQ Disability is 16 times more likely to trigger a mortgage foreclosure than death. 12 the lingering issue of high-cost healthcare

A NEW AGE OF WORK AND WORKERS

THE LINGERING ISSUE OF HIGH-COST HEALTHCARE

5 KEY CHARACTERISTICS OF THE GEN X’ER

4 KEY FINANCIAL SHOCKS FACING RETIREES

In a Cigna survey of American workers 13 , 44% of respondents said they worry about how they might pay for medical costs not covered by their medical plan. Voluntary Benefits can ease that worry.

46%

44%

of employees worry about finances while at work.

of employees spend 2-3 hours weekly on finances while working.

- Prudential, “Trending Toward Financial Wellness”

- Prudential, “Trending Toward Financial Wellness”

9 Plan Sponsor, “Medical Cost Trends Continue to Outpace Inflation and Wages” 10 American Payroll Association survey 11 Social Security Administration data 12 National Safety Council data 13 Cigna, “U.S. Workers Rely on Good Intentions More than Disability Coverage to Protect Financial Health”

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5 key characteristics of the gen x’er

A NEW AGE OF WORK AND WORKERS

THE LINGERING ISSUE OF HIGH-COST HEALTHCARE

5 KEY CHARACTERISTICS OF THE GEN X’ER

4 KEY FINANCIAL SHOCKS FACING RETIREES

20% of employees skip work at least once annually to deal with finances.

They’re stressed about having to take care of both children and aging parents.

Due to mortgages, credit cards, and auto, student and personal loans, they have the most debt of any of the generations.

They are pessimistic about their financial future.

- Prudential, “Trending Toward Financial Wellness”

34% of Americans have no money in savings.

- Corporation for Enterprise Development, “GoBankingRates Survey”

The 401(k) plan is their retirement savings vehicle of choice.

The majority plan to work in retirement.

49% of workers struggle to pay their household expenses on time.

- AARP, “5 Interesting Facts about Generation X”

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- SHRM, “Stress and Productivity”

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T H E R O L E O F T H E V O L U N T A R Y B E N E F I T S C O N S U L T A N T

4 key financial shocks facing retirees

A NEW AGE OF WORK AND WORKERS

THE LINGERING ISSUE OF HIGH-COST HEALTHCARE

The typical 65-year-old faces these costs during their lifetime (in today’s dollars):

5 KEY CHARACTERISTICS OF THE GEN X’ER

4 KEY FINANCIAL SHOCKS FACING RETIREES

Medical care not paid by Medicare or private insurance $16,000

Private insurance that partially fills Medicare gaps $18,000

44%

43%

of employees expect to postpone retirement due to finances.

of Americans are one medical emergency away from financial ruin.

Uncovered long-term care $44,000

Uncovered cost of prescription drugs $12,000

- MetLife, “Annual Employee Benefits Trends Study”

- Bankrate.com, “MoneyPulse Survey”

- Health Services Research, “The 2030 Problem: Caring for Aging Baby Boomers”

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the multi-generational safety net

THE MULTI-GENERATIONAL SAFET Y NET

6 TRENDS IN VOLUNTARY BENEFIT PRODUCTS

Today’s workplace is defined by diversity. There are more single women. Same-sex marriages are becoming common. Careers may span multiple employers over the decades. Employees want their health and welfare benefits to reflect their lives and address their needs; they want customized benefits that are portable. 14 Their desires represent new realities for employers as they design their health and welfare benefits programs. To manage a multi-generational workforce, it’s important to view employees as individuals with specific needs. The one-size-fits-all group benefits model with medical, prescription, dental, vision and a retirement plan is so 2010. The traditional approach to benefit plan design is no longer adequate to address the needs of a diverse, multi-generational workforce. Workers want benefit options that address what matters to them most. Fortunately, today’s Voluntary

OTHER POPULAR VOLUNTARY BENEFITS

Benefits are vastly different from even a few years ago as carriers respond to societal trends and generational requirements. Voluntary Benefits are typically employee-paid, enabling employers to add high-value coverages at relatively low or no cost. Voluntary Benefits: QQ Help employees address financial challenges at different stages of life QQ Provide employees with a guaranteed acceptance component QQ Deliver higher benefit maximums and preferential group pricing through carrier risk-pooling QQ Ease administration on the HR staff via automatic payroll deduction, credit card payment and other functions

Industry best practices dictate that a Voluntary Benefits program offer a suite of products to fit corresponding generational needs. In addition to Accident Insurance, Critical Illness, Hospital Confinement and Medical Bridge policies, employees may want Pre-paid Legal, Identity Theft, Pet Insurance and now, Student Loan Repayment Assistance. A thoughtfully designed Voluntary Benefits program will offer choice, flexibility and customization to accommodate the needs of a multi-generation workplace. Additionally, the improving economy has triggered worker demand for benefits that include expanded health, welfare, lifestyle and financial products. According to a BenefitsPRO survey, 83% of employees want and would fully pay for Voluntary Benefits. 15 Three-fifths of employees say Voluntary Benefits increase the value of their company’s overall benefits program. 16 To remain competitive in today’s healthier economic climate, employers are designing benefit plans with Voluntary products that protect employees of all ages. Voluntary Benefits create a synergistic relationship between employer and employee. Benefit programs that go beyond traditional health insurance, vision, dental, disability and retirement plans have been linked to greater recruitment and retention efforts and overall career happiness. In fact, 72% of employees surveyed agree that the ability to customize benefits increases loyalty to their employer. 17

58%

58%

of employees want customized benefit options.

of employees say they may take a job with slightly lower pay but a more robust benefits package. - Aflac, “WorkForces Report of Benefit Trends and Attitude”

- MetLife, “Annual Employee Benefits Trends Study”

14 MetLife, “15th Annual U.S. Employee Benefits Trends Study” 15 BenefitsPRO/Eastbridge, “Voluntary Benefits: 3 Key Insights on Purchasing Behavior” 16 Prudential, “Employee Benefits, Today and Beyond” 17 MetLife, “15th Annual U.S. Employee Benefits Trends Study”

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S O C I E T A L T R E N D S & V O L U N T A R Y B E N E F I T S

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6 trends in voluntary benefit products

THE MULTI-GENERATIONAL SAFET Y NET

6 TRENDS IN VOLUNTARY BENEFIT PRODUCTS

OTHER POPULAR VOLUNTARY BENEFITS

TREND NO. 2: INDIVIDUAL LONG-TERM CARE

TREND NO. 3: EXECUTIVE REIMBURSEMENT PLAN

TREND NO. 1: STUDENT LOAN DEBT REPAYMENT ASSISTANCE

90% 54%

of Millenials base job loyalty on how much the employer cares about their financial well-being.

of younger employees would commit to an employer for 5 years in exchange for help with student debt. - Student Loan Ranger, “American Student Assistance Survey”

TREND NO. 5: TELEMEDICINE

TREND NO. 6: PET INSURANCE

TREND NO. 4: EXECUTIVE INDIVIDUAL DISABILITY INSURANCE

- Price Waterhouse Cooper, “Financial Wellness Survey”

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6 trends in voluntary benefit products Trend No. 1: Student Loan Debt Repayment Assistance

THE MULTI-GENERATIONAL SAFET Y NET

6 TRENDS IN VOLUNTARY BENEFIT PRODUCTS

OTHER POPULAR VOLUNTARY BENEFITS

Student Loan Debt Repayment Assistance is a huge topic for Millennials and one of the leading financial wellness opportunities for attracting and retaining top talent. Yet only 4% of all employers offer any kind of student loan benefit. 18 How does it work? Programs vary. Some Student Loan Debt Repayment vendors use a model where the employer matches the employee student loan payment by contributing funds pre-tax into the 401(k) on behalf of the employee. The goal is a creative reallocation that frees up an employee’s budget to pay their loan while leaving more of their paycheck funds available for other necessities. Other models offer refinancing, which will turn a high interest loan into a lower interest loan. Refinancing can lower a monthly payment, and the borrower pays off the full loan amount. Another model is loan consolidation. Still another model aligns borrower with federal programs that are difficult for the individual to enroll and stay in over the long term. Most programs allow the employer to channel payroll deductions directly to the student loan financial institution. Features and benefits of Student Loan Debt Repayment Assistance may include student loan monitoring, repayment assistance, counseling, employee pre-tax contributions, employer contributions and loan refinancing. In general, the employer agrees to pay a specific amount toward the employee’s student loan debt, or reimburses the individual for up to a specified amount of what the employee paid toward the loan in a given year. The employee enrolls in a plan that aligns with their financial situation. By reducing or possibly eliminating the employee’s monthly loan payment, the employer’s total compensation package can become more competitive without having to increase wages. What to watch for: These programs can have a high per-employee, per-month cost. Also, work with your benefits broker’s ERISA attorney to ensure the student loan assistance program is compliant, especially if it involves matching contributions to a 401(k). Trend No. 2: Individual Long-term Care Individual Long-term Care Coverage helps pay for care for individuals with chronic illnesses, disabilities or other conditions over an extended period of time. Individual Long-term Care provides funds to help cover the cost of home care, assisted living, adult day care, respite care, hospice care, nursing home and Alzheimer’s facilities. Without this coverage, the patient may have to rely on family members for financial support and/or actual care, which often exacts a physical and emotional toll on the caregiver. The cost of long-term care can quickly deplete life savings. How does it work? Group Long-term Care policies are all but non-existent. Small and mid-sized employers (and even many large groups) tend to utilize Individual Long-term Care policies bundled together with a group discount. 19 Bundling Individual Long-term Care policies provides employers with greater choice in selecting a preferred insurer based on pricing, ratings and financial stability, and policy options. Because an employee can’t predict future long-term care needs, consider an insurance product that offers flexible options. Employees can purchase coverage for a direct relative, such as a parent, spouse or child. What to watch for: Individual Long-term Care is complex. Employers need a Voluntary Benefits expert to help them navigate the market. Also, the older the covered employee or dependent is, the more costly the coverage will be. While exceedingly rare, the carrier reserves the right to increase the premium in the future.

Only 4%% of employers offer Voluntary Benefits

- US News and World Report

40 million Americans provide unpaid care to adult family members.

18 US News and World Report, “Young Workers Turn to Employers for Student Loan Debt Solutions” 19 American Association for Long-term Care Insurance, “Types of Group Long-term Care Insurance Coverage”

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- AARP, “Study on Caregiving in the U.S.”

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6 trends in voluntary benefit products Trend No. 3: Executive Reimbursement Plan

THE MULTI-GENERATIONAL SAFET Y NET

6 TRENDS IN VOLUNTARY BENEFIT PRODUCTS

OTHER POPULAR VOLUNTARY BENEFITS

Executive Reimbursement Plans supplement a traditional group health plan. The plan covers deductibles, copays, balance bills and other out-of-pocket costs for medical, vision and dental expenses not covered by a primary plan. Services, such as brand-name prescriptions, extensive dental procedures, corrective vision surgery, hearing aids, etc., are of value to highly paid top talent. How does it work? An Executive Reimbursement Plan is a fully insured program that reimburses high wage-earners and/or executives on a tax-free basis to cover their out-of-pocket medical, dental and vision expenses. Plans can be tiered with coverages ranging from $1,000 to $10,000, depending on the service. The top-level tier may require a minimum enrollment (example: 15 executives or high-wage earners). What to watch for: This plan is 100% employer-paid. Make sure that the amount of extra reimbursement is high enough to offset group medical, dental and vision out-of-pocket coverages. Trend No. 4: Executive Individual Disability Insurance Typical Long-term Disability insurance provides basic universal benefits that replace part of lost income when the employee is unable to work due to illness or injury. However, the basic benefit rarely replaces bonuses, commissions or any excess income above the base salary. Some group Long-term Disability contracts aren’t portable, either. Executive Individual Long-term Insurance adds an additional layer of Long-term Disability protection on top of a core plan, allowing the employer to “class out” executives without altering the group Long-term Disability contract. Executive Individual Disability Insurance protects the most important decision-makers in the event they become disabled. This coverage prevents them from getting short-changed. Executive Individual Disability Insurance also ends unintended discrimination against high-income earners. How does it work? Unlike workers’ compensation, Executive Individual Disability Insurance supplements income even when the illness or injury isn’t job-related. It typically follows the same elimination period as the group Long-term Disability contract. Claims can be made concurrently to other employer-provided Short- or Long-term Disability and Individual Disability contracts. What to watch for: Ensure that the amount of reimbursement is high enough to make a difference, especially for employee populations of high-income earners.

40% 70%

of people receiving long-term care services are 18-64 years old.

of people over age 65 will require long-term care services.

- National Institutes of Health

- National Institutes of Health

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6 trends in voluntary benefit products

THE MULTI-GENERATIONAL SAFET Y NET

6 TRENDS IN VOLUNTARY BENEFIT PRODUCTS

Trend No. 5: Telemedicine The rise in the use of Consumer Driven Health Plans, where the employee bears a greater cost share for healthcare, is prompting employers to find options that can offset out-of-pocket expenses. An overlooked solution is Telemedicine, which can be included as part of a core health plan or purchased as a Voluntary Benefit on a stand-alone basis. How does it work? Telemedicine puts a subscriber (i.e., an employee or covered dependent) in touch with a U.S. board-certified physician operating in their state of residency. The physician can treat common ailments such as colds and flu, sinus infections, allergies, pink eye, etc., and prescribe certain medications. Telemedicine gives the patient direct access to a doctor 24 hours a day, seven days a week and 365 days a year. The consultation can take place by a phone call, email or a web-based video call, and may include discussing symptoms, treatment options and prescriptions. Telemedicine consultations are a supplement for non-emergency treatment and visits to a primary care physician. What to watch for: Some group health plans provide Telemedicine as part of primary care/office copay. Check with the medical carrier to see if Telemedicine is already included in core healthcare coverage, what the copayment is, and which health services are covered. Trend No. 6: Pet Insurance Americans spend nearly $70 billion on their pets, with nearly a quarter of that amount devoted to veterinary care. 20 But only 1% to 2% of the nation’s 90 million dogs and more than 94 million cats are insured. Pet Insurance is the fast-growing trend in veterinary medicine. Employer-sponsored benefit plans insure the family pet against accidents and illness. Unlike common veterinary discount programs that may or may not be accepted by veterinary practices, Pet Insurance operates similarly to medical insurance for humans. How does it work? Employees make claims directly to the insurer, bypassing the veterinary clinic. A basic plan for certain illnesses and accidents can cost $20 or less a month; more comprehensive policies covering annual wellness exams, vaccinations, blood work and a range of treatments start at $63 a month. 21 What to watch for: Pet Insurance typically applies to dogs, cats and other small mammals, as well as birds and even some exotic animals. One exception is that farm animals, including horses, are typically exempt from Pet Insurance. However, potbelly pigs are usually covered. Despite the potentially high cost of premiums, there seems to be little downside to this Voluntary Benefit. Employees have an emotional attachment to their animals and Pet Insurance gives them peace of mind.

OTHER POPULAR VOLUNTARY BENEFITS

68% 1 in 8

Americans seek medical treatment each year due to accidents.

of employers offer Accident Insurance as a Voluntary Benefit.

- Life Insurance & Market Research Association

- Life Insurance & Market Research Association

20 American Pet Products Association, “Pet Industry Market Size & Ownership Statistics” 21 New York Times, “Pet Insurance Is the Latest Work Perk”

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T H E R O L E O F T H E V O L U N T A R Y B E N E F I T S C O N S U L T A N T

other popular voluntary benefits

THE MULTI-GENERATIONAL SAFET Y NET

6 TRENDS IN VOLUNTARY BENEFIT PRODUCTS

We’ve learned that Voluntary Benefits are gaining in popularity as “gap fillers” that help employees cover some of their out-of-pocket financial exposure left by core medical and other health and welfare coverages. Voluntary Benefits can also include Medical, Dental, Vision and Prescription coverage in the form of discount programs as well as Individual Disability Insurance. As the employee benefits landscape continues to track societal trends, Voluntary Benefits will likely follow suit. For example, we’re seeing more businesses drop employer-paid Dental and Vision from their core benefits and offering these coverages as Voluntary solutions. Below is a sampling of other Voluntary options that can benefit multi-generational workforces:

OTHER POPULAR VOLUNTARY BENEFITS

ACCIDENT INSURANCE

CANCER PROTECTION

CRITICAL ILLNESS

DISCOUNT MEDICAL, DENTAL, VISION, PRESCRIPTION

EMPLOYEE CONVENIENCE/DISCOUNT PURCHASING

PERSONAL EXCESS LIABILIT Y UMBRELLA

GROUP LEGAL

ACCIDENT INSURANCE

CANCER PROTECTION

CRITICAL ILLNESS

DISCOUNT MEDICAL, DENTAL, VISION, PRESCRIPTION

EMPLOYEE CONVENIENCE/ DISCOUNT PURCHASING

PERSONAL EXCESS LIABILITY UMBRELLA

GROUP LEGAL

HOME/AUTO

HOSPITAL CONFINEMENT/MEDICAL BRIDGE

PET DISCOUNT CARE

VOLUNTARY DENTAL

VOLUNTARY SHORT-TERM DISABILIT Y & LONG-TERM DISABILIT Y

VOLUNTARY SUPPLEMENTAL LIFE

VOLUNTARY VISION

HOME/AUTO

HOSPITAL CONFINEMENT/ MEDICAL BRIDGE

PET DISCOUNT CARE

VOLUNTARY DENTAL

VOLUNTARY SHORT-TERM DISABILITY AND LONG-TERM DISABILITY

VOLUNTARY SUPPLEMENTAL LIFE

VOLUNTARY VISION

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T H E R O L E O F T H E V O L U N T A R Y B E N E F I T S C O N S U L T A N T

other popular voluntary benefits Accident Insurance

THE MULTI-GENERATIONAL SAFET Y NET

6 TRENDS IN VOLUNTARY BENEFIT PRODUCTS

OTHER POPULAR VOLUNTARY BENEFITS

Accident Insurance provides a direct payment to an employee who suffers an injury and requires medical attention. Payments are typically based on the type of injury and treatment received as defined on a schedule of benefits included with the policy. Employees can typically choose coverage for on- and off-the-job or off-the-job only accidents. They have a choice of family or stand-alone coverage for themselves, their spouse or dependent children. Optional riders on these policies, such as disability income, are available at an additional cost. Some plans include benefits for accidental death and dismemberment resulting from an accident. Accident plans are popular among people who work in higher-risk professions (drivers, law enforcement, fire personnel, public works staff, factory workers, etc.). This coverage is also popular among employees with children, especially if the youngsters are involved in sports and other physical activities. Cancer Protection According to a recent survey by JAMA, more than one-third of insured cancer patients receiving anticancer therapy faced out-of-pocket costs that were greater than expected. 22 Cancer Protection plans provide a direct payment if an employee is diagnosed with an internal cancer; skin cancer is usually excluded. The payment is typically a lump sum upon diagnosis that can be spent however the policyholder wishes. Typically, payments are used for normal cancer treatments, experimental cancer treatments, and indirect financial expenses associated with a cancer diagnosis/treatment such as transportation to a care center of excellence, family member boarding at a hotel during patient treatment, loss of wages while out of work, etc. Critical Illness Out-of-pocket expenses have risen for hospitalized patients in recent years. A heart attack that triggers a $1,200 out-of-pocket expense in 2009 will cost about $1,600 in 2017. 23 Critical Illness coverage provides a direct payment to employees who are diagnosed with an illness that is covered under the policy contract, such as heart attack, stroke, end-stage kidney failure, organ failure, HIV, blindness and cancer. Benefits are typically paid in a lump sum upon the diagnosis of a covered illness. Benefits from the policy can be used for medical bills (out-of-pocket copays and deductibles), medical equipment, home healthcare, and non-medical expenses such as mortgage, child care, patient and family travel/lodging related to care, loss of wages, etc.

ACCIDENT INSURANCE

CANCER PROTECTION

CRITICAL ILLNESS

DISCOUNT MEDICAL, DENTAL, VISION, PRESCRIPTION

EMPLOYEE CONVENIENCE/DISCOUNT PURCHASING

PERSONAL EXCESS LIABILIT Y UMBRELLA

GROUP LEGAL

HOME/AUTO

HOSPITAL CONFINEMENT/MEDICAL BRIDGE

PET DISCOUNT CARE

VOLUNTARY DENTAL

VOLUNTARY SHORT-TERM DISABILIT Y & LONG-TERM DISABILIT Y

VOLUNTARY SUPPLEMENTAL LIFE

VOLUNTARY VISION

Discount Medical, Dental, Vision, Prescription For employees who typically don’t have access to Health, Dental, Vision, or Prescription insurance benefits (such as part-time and/or temporary employees), these Voluntary products are an innovative solution. They provide access to deeply discounted care through a network of healthcare professionals, such as doctors, pharmacists, dentists, eye doctors and telemedicine providers.

37% of employees who suffered a critical illness are out of work 4+ months.

22 JAMA Network, “Out-of-Pocket Costs, Financial Distress and Underinsurance in Cancer Care” 23 Forbes, “That Heart Attack is Going to Cost You”

- Sun Life Report

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S O C I E T A L T R E N D S & V O L U N T A R Y B E N E F I T S

H OW T O L A U N C H A V O L U N T A R Y B E N E F I T S P R O G R A M

T H E R O L E O F T H E V O L U N T A R Y B E N E F I T S C O N S U L T A N T

other popular voluntary benefits

THE MULTI-GENERATIONAL SAFET Y NET

6 TRENDS IN VOLUNTARY BENEFIT PRODUCTS

Employee Convenience/Discount Purchasing With the average American employee continuing to experience financial stress, it can be difficult to purchase affordable, essential or life-enhancing household items and services. For several years, Employee Purchase programs have provided discounts on computers, electronics and home appliances. Recently they’ve branched out to provide discounts on furniture, home fitness equipment, power tools, grills, baby and children’s gear, travel/vacation clubs, and entertainment services. These plans don’t always offer products and services at a discount, and sometimes their allure is purely for convenience. When they do offer purchasing opportunities at a discount, these plans help employees stretch their income. Personal Excess Liability Umbrella One traditional product that has nothing to do with managing the financial impact of illness is Personal Excess Liability insurance. This provides protection beyond the employee’s primary personal liability coverage and begins when that coverage has been exhausted. Employees are offered a range of limits to choose from and charged a corresponding premium amount through payroll deduction. The policy covers personal liability lawsuit damages for which an employee or a covered household member may be legally responsible. Legal defense costs for a covered loss are at the carrier’s expense and in addition to the policy limit. Incorporating Personal Risk Management benefits into an executive benefits portfolio is a powerful strategy for attracting and retaining the best top-tier candidates. Group Legal Sooner or later most people need the services of an attorney. Group Legal plans provide convenient, affordable, and reliable legal consultation with a licensed attorney. Coverage can apply to estate planning (wills and trusts) or common legal issues, such as landlord-tenant disputes, document/contract reviews, traffic violations, auto collision claims, and even immigration. Group Legal plans often pay for themselves with just one use. Attorney fees are typically high, and the protection offsets the expense. Studies show that most employees who are enrolled in a Group Legal plan use it about five times a year. This service also helps to reduce on-the-job stress (presenteeism) and employee down time (absenteeism) which improves business productivity. Home/Auto Unlike traditional open-market Home and Auto insurance plans, those offered as part of a group employer-sponsored Voluntary program can increase the opportunity for employees to be accepted by a carrier with additional savings on the premium. A Home and Auto program is often perceived as a valuable Voluntary Benefit solution. Most Home and Auto carriers working through Voluntary workplace programs can offer employees competitive quotes to compare with their current policies.

OTHER POPULAR VOLUNTARY BENEFITS

ACCIDENT INSURANCE

CANCER PROTECTION

CRITICAL ILLNESS

DISCOUNT MEDICAL, DENTAL, VISION, PRESCRIPTION

EMPLOYEE CONVENIENCE/DISCOUNT PURCHASING

PERSONAL EXCESS LIABILIT Y UMBRELLA

GROUP LEGAL

HOME/AUTO

HOSPITAL CONFINEMENT/MEDICAL BRIDGE

PET DISCOUNT CARE

VOLUNTARY DENTAL

VOLUNTARY SHORT-TERM DISABILIT Y & LONG-TERM DISABILIT Y

VOLUNTARY SUPPLEMENTAL LIFE

VOLUNTARY VISION

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S O C I E T A L T R E N D S & V O L U N T A R Y B E N E F I T S

H OW T O L A U N C H A V O L U N T A R Y B E N E F I T S P R O G R A M

T H E R O L E O F T H E V O L U N T A R Y B E N E F I T S C O N S U L T A N T

other popular voluntary benefits

THE MULTI-GENERATIONAL SAFET Y NET

6 TRENDS IN VOLUNTARY BENEFIT PRODUCTS

Hospital Confinement/Medical Bridge These plans provide a direct payment to employees for each day they are hospitalized due to an injury or illness and for certain preventative care and outpatient surgical procedures. The payment can be used for out-of-pocket deductibles and other unexpected expenses that the employee’s major medical health insurance may not cover. These plans are one way to guard against catastrophic medical expenses without paying sky-high premiums for more traditional health insurance. Pet Discount Care Since most people regard their animals as family members, this product is perceived as a valuable Voluntary Benefit. Discount Pet Care helps employees save on veterinarian and prescription costs with steep in-network discounts. It’s major medical protection for pets. Pet Discount Care plans can be cheaper than traditional Pet Insurance (see page 10) and don’t include most of the limitations and exclusions. With Pet Discount Care plans, pet owners receive a direct payment of a set amount based on a schedule of benefits. However, not all veterinarians accept these discount products. Employees should check to ensure their veterinarian is a participating provider. Voluntary Dental Voluntary Dental plans are also popular among employers and employees. These plans offer affordable rates, large dental provider groups, deep in-network discounts on procedures, orthodontics for children and adults, and a full range of preventative, basic, and major care, endodontics, etc. Dental problems and gum disease can also be indicative of medical issues. Therefore, Voluntary Dental plans can help employers control their healthcare costs. Voluntary Short-term Disability and Long-term Disability Short-term Disability (STD) and Long-term Disability (LTD) protect an employee’s ability to earn a paycheck. These benefits are as important as Life Insurance because one in four of today’s 20-year-olds will become disabled before they retire. 24 Anyone who earns a paycheck needs to protect it. Voluntary STD and LTD provide additional financial protection at no cost to the employer and give employees the opportunity to choose options aligned with personal needs and budgets. When offered together, STD and LTD plans should complement each other.

OTHER POPULAR VOLUNTARY BENEFITS

ACCIDENT INSURANCE

CANCER PROTECTION

CRITICAL ILLNESS

DISCOUNT MEDICAL, DENTAL, VISION, PRESCRIPTION

EMPLOYEE CONVENIENCE/DISCOUNT PURCHASING

PERSONAL EXCESS LIABILIT Y UMBRELLA

GROUP LEGAL

HOME/AUTO

HOSPITAL CONFINEMENT/MEDICAL BRIDGE

PET DISCOUNT CARE

VOLUNTARY DENTAL

VOLUNTARY SHORT-TERM DISABILIT Y & LONG-TERM DISABILIT Y

VOLUNTARY SUPPLEMENTAL LIFE

VOLUNTARY VISION

The No. 1 non-traditional Voluntary product is Pet Insurance.

24 Council for Disability Awareness, “Chances of Disability”

- BenefitsPRO/Eastbridge Voluntary Benefits Survey

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S O C I E T A L T R E N D S & V O L U N T A R Y B E N E F I T S

H OW T O L A U N C H A V O L U N T A R Y B E N E F I T S P R O G R A M

T H E R O L E O F T H E V O L U N T A R Y B E N E F I T S C O N S U L T A N T

other popular voluntary benefits

THE MULTI-GENERATIONAL SAFET Y NET

6 TRENDS IN VOLUNTARY BENEFIT PRODUCTS

Voluntary Supplemental Life Many businesses offer their employees some level of employer-paid life insurance coverage, typically one to three times the employee’s annual salary. This coverage is usually not enough to provide survivors with adequate financial protection if the employee should die. A payout of five to 10 times an annual salary is considered adequate protection to cover funeral expenses, mortgage, rent, car payments, college tuition, and future lost income replacement. Supplemental Life insurance is the most common and popular Voluntary Benefit offered at the workplace. 75% of full-time workers have access to Life Insurance. 25 Affordable rates and convenience (payment of premiums through payroll deduction) are two reasons for this product’s popularity. Features often include guaranteed issue, spouse and dependent children coverage, spouse-only coverage and portability. Carriers also offer additional features such as accelerated death benefits, where the employee receives a defined portion of the insurance benefit while still alive if they become terminally ill. Another feature is waiver of premium benefits if the employee becomes completely disabled. The payout upon death is reduced when the policyholder receives a defined portion or a waiver of premium benefit. There are essentially two forms of life insurance: Term Life and Permanent Life, and both can be offered as Voluntary Benefits. Term Life Insurance protects the employee’s beneficiaries in the event of the policyholder’s premature death. Permanent Life insurance protects an employee’s beneficiaries whenever the policyholder dies, provided premiums have been paid for. Two categories of Permanent Life include Whole Life insurance and Universal Life Insurance. Voluntary Vision Voluntary Vision plans are affordable and desired by employees. These plans typically offer one of the best returns on investment through access to deep discounts on popular frames and contact lenses. They also offer discounts for lens prescriptions and provider visits. More than 80% of employers offer Voluntary Vision. 26 Voluntary Vision plans help employers control the cost of their medical plan because regular eye exams help detect diabetes, high blood pressure, high cholesterol, and other sight-related medical conditions that often don’t have warning signs.

OTHER POPULAR VOLUNTARY BENEFITS

ACCIDENT INSURANCE

CANCER PROTECTION

CRITICAL ILLNESS

DISCOUNT MEDICAL, DENTAL, VISION, PRESCRIPTION

EMPLOYEE CONVENIENCE/DISCOUNT PURCHASING

PERSONAL EXCESS LIABILIT Y UMBRELLA

GROUP LEGAL

HOME/AUTO

HOSPITAL CONFINEMENT/MEDICAL BRIDGE

PET DISCOUNT CARE

VOLUNTARY DENTAL

VOLUNTARY SHORT-TERM DISABILIT Y & LONG-TERM DISABILIT Y

VOLUNTARY SUPPLEMENTAL LIFE

VOLUNTARY VISION

25 U.S. Department of Labor data 26 Prudential Financial Survey

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S O C I E T A L T R E N D S & V O L U N T A R Y B E N E F I T S

H OW T O L A U N C H A V O L U N T A R Y B E N E F I T S P R O G R A M

T H E R O L E O F T H E V O L U N T A R Y B E N E F I T S C O N S U L T A N T

While interest in Voluntary products is rising, and employers are designing benefit portfolios to include them, their value is essentially wasted if new product offerings aren’t effectively communicated to the workforce. A recent study by MetLife found that a third of employees are not actively engaged in their annual benefit plan enrollment, even when employers are communicating with them. To encourage employee engagement in benefits, especially if a program is incorporating Voluntary products, employers need a plan. 8 steps to a successful voluntary benefits program

8 STEPS TO A SUCCESSFUL VOLUNTARY BENEFITS PROGRAM

STEP 01 Survey your employees to identify insurance preferences.

STEP 03 Define goals and objectives; secure management’s buy-in.

STEP 02 Conduct a gap analysis to on current benefit offerings vs. competitors.

STEP 08 Complete your post-enrollment follow-up.

68%

1 in 4

STEP 04 Choose carriers; set the strategy and calendarize every step.

STEP 06 Offer channel-of-choice enrollment options.

increase in multi-million-dollar medical cases over the past four years.

adults in the U.S. have two or more chronic illnesses.

STEP 05 Conduct group and individual educational meetings.

STEP 07 Simplify your messaging and repeat it often.

- Sun Life, “Catastrophic Claims Report”

- Centers for Disease Control and Prevention

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S O C I E T A L T R E N D S & V O L U N T A R Y B E N E F I T S

H OW T O L A U N C H A V O L U N T A R Y B E N E F I T S P R O G R A M

T H E R O L E O F T H E V O L U N T A R Y B E N E F I T S C O N S U L T A N T

STEP 1. Offer Voluntary Benefits based on what you know about your employees. What kind of benefits do your employees want and need? Needs can arise from workforce demographics, life events, or gaps in your core coverage that cause plan participants to experience significant out-of-pocket financial risk. Survey your workforce to determine their preferences. But be careful with wording of survey questions because employees may not understand the context. Keep it simple and don’t assume that employees comprehend insurance jargon or common terminology. Start with one question: “Could we do a better job by providing Voluntary Benefits?” If more than 20-30% of employees respond with a “yes,” follow up with another short survey. The first question in next survey should be, “What is the benefit that you want or need most?” or “What is missing from our benefits program?” When it comes to health and welfare benefits, a “need” typically predicates a “want.” Next, ask employees to rank Voluntary Benefits in order of importance. These could range anywhere from Accident, Critical Illness, Vision, Dental, Disability and Long-term Care benefits to Student Loan Repayment, Pet Insurance, Legal plans and Group Medical Bridge coverage. The results of this ranking survey can help you determine which Voluntary Benefits you offer. 8 steps to a successful voluntary benefits program

8 STEPS TO A SUCCESSFUL VOLUNTARY BENEFITS PROGRAM

STEP 01 Survey your employees to identify insurance preferences.

STEP 03 Define goals and objectives; secure management’s buy-in.

STEP 02 Conduct a gap analysis to on current benefit offerings vs. competitors.

STEP 08 Complete your post-enrollment follow-up.

STEP 04 Choose carriers; set the strategy and calendarize every step.

STEP 06 Offer channel-of-choice enrollment options.

80% of employers now offer an HDHP.

STEP 05 Conduct group and individual educational meetings.

STEP 07 Simplify your messaging and repeat it often.

- Empyrean Benefit Trends Report

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S O C I E T A L T R E N D S & V O L U N T A R Y B E N E F I T S

H OW T O L A U N C H A V O L U N T A R Y B E N E F I T S P R O G R A M

T H E R O L E O F T H E V O L U N T A R Y B E N E F I T S C O N S U L T A N T

2. Offer Voluntary Benefits based on what you know about your competitors. Voluntary Benefits can help differentiate your organization among your competitors. Begin by benchmarking the benefits offered by other employers in your industry and geographic region. This process will help you compete for and retain quality employees. Your Voluntary Benefits should fall in line with those offered by your competitors or even be enhanced to allow you to hire the top talent and get a leg up on your competitors. 3. Management buy-in and commitment is critical. Buy-in from the top of your organization will go a long way to ensure that the Voluntary Benefits program you provide is considered by employees in light of their own needs and personal situations. Your executives, department heads and line supervisors can be great advocates for your benefits package. Help your managers understand the value of your Voluntary Benefits and encourage them to spread the word. Without buy-in from the top, a Voluntary program will likely be doomed from the start. 8 steps to a successful voluntary benefits program

8 STEPS TO A SUCCESSFUL VOLUNTARY BENEFITS PROGRAM

STEP 01 Survey your employees to identify insurance preferences.

STEP 03 Define goals and objectives; secure management’s buy-in.

STEP 02 Conduct a gap analysis to on current benefit offerings vs. competitors.

STEP 08 Complete your post-enrollment follow-up.

STEP 04 Choose carriers; set the strategy and calendarize every step.

STEP 06 Offer channel-of-choice enrollment options.

STEP 05 Conduct group and individual educational meetings.

59% of Americans don’t have enough cash to pay a $1,000 ER visit.

STEP 07 Simplify your messaging and repeat it often.

- Bankrate.com, “MoneyPulse Survey”

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