Employer Paid Voluntary Products
Updated: Feb 1, 2021
Here’s your allowance, don’t spend it all in one place!
A large insurer recently rolled out “Portable Benefits”, proving the desire to offer greater plan flexibility is alive and well in 2021. Voluntary benefits like these, offer employees choice while offering companies solace from the opportunity cost of giving one benefit over another.
The concept of voluntary benefits is simple: the employer chooses a selection of benefits, which are offered to employees to purchase at a group discounted rate. With some benefits, the employee is paying for the coverage themselves, so they can keep the coverage after they’ve left that job.
Why are voluntary benefits a good way to achieve higher flexibility?
The employer controls the offerings, while employees decide what to spend their funds on.
Here's how voluntary products can work inside of a benefit plan:
Employers have a huge challenge in designing benefit plans with five generations currently in the workforce*. With small to medium-sized businesses, multiple generations can be present in a company with 10 employees. Moreover, small and mid-sized employers compete for the same talent as larger employers, increasing the need to offer flexible benefits.
Besides needing benefits that suit multiple generations, finding quality products to offer employees can be a challenge. Older employees may value Critical Illness insurance, whereas Gen Z's might prefer fitness & wellness-related products. Providers may insist on mandatory products as well – making things expensive and confusing for companies to decide what to offer.
Alternatively, offering multiple voluntary products and letting employees choose what they want for themselves, removes this pressure.
If a mandatory, non-voluntary product is added for all employees, reporting creates some problems from a privacy and cost-benefit analysis standpoint; many providers do not want to provide reporting for small groups. If the group is small enough, the employer may figure out who is accessing the product and therefore could discriminate. This reporting issue makes it difficult to assess the ROI.
If you cannot know who, if any, are using the benefit, how do you justify offering it? If employers pay $1000 a year for their employees to access telemedicine services, yet do not know who (if anyone) uses it, then the ROI is a mystery.
Voluntary, however, allows you to simply offer it, and if of value, your employee chooses to purchase it. The employer knows they opted for the product but does not need to know how often it is utilized.
Traditionally, the employees pay for all voluntary products. Curating the right product line and and communicating the benefits effectively can lead to success with voluntary offerings.
Employee utilization has not been the greatest in this segment of the market, so we decided to approach voluntary benefits in a new way. Options like Travel insurance, Critical Illness and Pet insurance, estate planning products and wellness programs are available to purchase using the annual limit the employer has already budgeted for each employee. Integrating voluntary benefits into the spending account allows the employer to build in more flexibility while containing costs.
Over recent years, we have really seen the success of our myFlexplan – where employees decide where their annual credit allocation is placed – to their Health Spending Account, Wellness Spending Account or in some cases, RRSP. At the core of this plan is flexibility and control for employees. Now imagine adding voluntary benefits into that decision – employees are responsible for choosing what they want and need, designing their own benefit package, all within their employer’s budget.