Employee Benefits Menu Boosted by Mix of Voluntary Options

More U.S. employers are offering voluntary benefits to their employees for two main reasons: the growing cost of health care, which has led employers to shift costs to voluntary benefits, and the desire to attract and retain employees, experts say.

According to the fifth annual Study of Employee Benefits Trends by New York-based Metropolitan Life Insurance Co., 39 percent of employers ranked providing a wider array of voluntary benefits as either “extremely important” or “very important” in 2006, up from 31 percent in 2005.

By line of business, with an estimated $4.72 billion in voluntary benefit sales in 2006, disability insurance accounted for the largest share with 23 percent, followed by life insurance at 21 percent, according to Avon, Connecticut-based Eastbridge Consulting Group Inc.

A voluntary benefit program is “an easy way for employers to address” employee needs, says Lawrence Singer, senior vice president at Segal Co., a benefits consultant in New York. “The employer’s involvement is marginal, the investment is zero or quite low, and employees get the protection by buying the product with their own money.”

Randall Stram, Bridgewater, New Jersey-based vice president of employee paid products for MetLife, says employers today are in a conundrum. They want to retain employees, help them with their work/life issues and increase job satisfaction, but they also want to control benefit costs.

“The answer that many employers are coming to is that voluntary benefits are a very cost-effective way to supplement their employer-paid benefit offerings,” he says.

“Many employees are interested in [voluntary benefits] when they’re hired,” says Kathy Croley, payroll administrator for Laurel, Delaware-based Johnny Janosik Inc., a furniture retailer with about 300 employees that works with Voluntary Benefits Systems Inc., an Ellicott City, Maryland-based voluntary benefits marketer.

“Also, we like to help take care of our employees. It’s more beneficial to us in the long run,” says Croley of the retailer, which offers voluntary benefits that include short- and long-term disability, life, critical illness, dental and accident insurance.

Voluntary benefits also help employee recruitment, said Marjorie Teague, human resource manager of Mattawan, Michigan-based Ralph Moyle Inc., a 135-employee trucking firm. It “definitely gets them more motivated to come here rather than somewhere else,” said Teague, who works with Columbus, Georgia-based American Family Life Assurance Co. of Columbus, which is known as AFLAC.

Kathy McPhillips, director of benefits for Bensalem, Pennsylvania-based Charming Shoppes Inc., which operates 2,400 retail stores in 48 states, added homeowners, auto and pet insurance and a computer purchasing program to its existing voluntary benefits last year for its 33,000 employees.

The goal was “to really enhance our overall benefits package and some things we thought would be of particular value to our associates, full- and part-time,” says McPhillips, who works with consulting firm Watson Wyatt Worldwide in Washington.

Furthermore, a voluntary benefits program gives employees “access to benefits at better rates” because they are part of a group.

“Then it allows them to pay for it through payroll deductions,” says Judy Hime, Jackson, Tennessee-based benefits manager for West Tennessee Health Care, which has about 5,600 employees.

Employees are less likely to miss a small sum taken out of their paycheck twice a month than “if they had to make a monthly or quarterly payment to the insurance company,” says Hime of the hospital chain, which has coverage through Hartford, Connecticut-based Cigna Corp.

Employers also are using so-called mini-medical plans, which cover basic medical services that include physician visits and prescription drugs, as a tool to retain employees where they may not have had medical coverage before, says Phil Grece, New York-based vice president and product manager in American International Group Inc.’s domestic accident and health division.

Increased medical costs are a factor as well.

“I think [voluntary benefits are] going to increase in popularity because the health insurance costs have continued to grow” and cutbacks in employer-paid programs are creating gaps in employees’ health coverage, says Ted Bosse, president of Voluntary Benefits Systems Inc.

“There’s many more employers that are not paying for what maybe five, 10 years ago was a traditional employer-paid benefit,” such as dental and disability insurance, says Mark Sylvester, vice president of voluntary sales at Kansas City, Missouri-based Assurant Employee Benefits, an employee benefits marketer.

“Companies are not just offering benefits for the sake of offering voluntary benefits, but they are offering it for a reason that would fit into their company benefit strategy,” says Garry Sullivan, senior vice president at Aon Consulting, a unit of Chicago-based Aon Corp. “If they just had an increase in their health care contributions for employees,” they may consider introducing an auto or homeowners program that would save employees money and help offset their higher health care costs, he says.

Additionally, employers have moved away from offering concierge-type products, such as discount movie tickets and take-home dinners, which were more common about 10 years ago, says MetLife’s Stram. “We’re seeing less of that, with more focus on the financial security, financial protection products,” which is a reflection of employers’ desire “to provide supplemental benefits to their employees.”

The suite of benefits offered to the 3,800 employees at Boston-based Blue Cross Blue Shield of Massachusetts, however, includes group universal life and long-term care insurance; legal services; pet, auto, homeowners, renters, identify theft and travel insurance; and consumer product discounts for cell phones, electronics and movie tickets, says Debra Weafer, director of compensation and benefits.

There is “not a lot of opportunity to increase the benefits package,” and voluntary benefits are a way to “add something new and different for our associates,” Weafer says.

Filed by Judy Greenwald of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.