Introduction
Long-time residents of corporate America like me are used to the annual group benefits enrollment process. The “enrollment season” email typically arrives with the benefits information, change highlights, and a friendly, but serious reminder to not miss the enrollment deadline. If you’re like me, you vow to renew your benefits selections immediately before the reminder gets pushed to the bottom of your inbox, where it’s forgotten until you get a stern call from Human Resources.
For most private sector companies, participation in employee benefits programs remains healthy. According to the latest U.S. Bureau of Labor Statistics Report on U.S. Employee benefits, 51% of private sector workers participated in an employer sponsored-retirement benefits program,i while 48% of private sector workers participated in an employer-sponsored healthcare benefits program.ii Group benefits companies have also noted that for them, a silver lining of the pandemic has been reports of greater appreciation of employer benefits programs among plan sponsors and employees. This sentiment may also be reflected in the current voluntary benefits markets, with some individual companies noting upticks in the number of employers adding new or additional voluntary benefits to their current packages.iii This is especially good news for many carriers who have often experienced employee disinterest in voluntary benefits products.
In general, most employees know it is wise to plan for unexpected events, like an accident or serious illness. Yet when the enrollment opportunity comes along, they fail to take advantage of the voluntary benefits that can help protect their financial wellbeing. What explains this disconnect? It mainly results from three longstanding barriers to voluntary benefits plan sponsor adoption and employee enrollment:
- A lack of frequent, timely employee education about how voluntary benefits products are important for reducing likely out-of-pocket insurance or other health-related costs;
- The high cost of products and their perceived complexity; and
- A confusing and often labor-intensive claims submission process.
The Barriers Explained
Inadequate education. Busy employees often lack the time to do the research on the value of voluntary benefits products; 67% of employees have reported that they find shopping for or enrolling in benefits either too complicated, too time consuming, or too stressful.iv Group insurance companies therefore need to provide simplified, Amazon-like comparison shopping experiences to better inform employees about the possible savings from voluntary benefits products, as well as provide the proper context around them. For example, more physically active employees, as well as those with children, should be made aware of accident coverages that can help offset high health insurance deductibles and frequent co-pays. Older employees with concerns about future hospital stays that could exceed core health insurance maximums should receive information about hospital indemnity coverages. In addition, more frequent and targeted education about voluntary products, not just during the annual company benefits enrollment period, should be made available to employees; a recent workplaces report by Aflac reported that insufficient education and advice was the leading reason for employees’ voluntary benefits non-enrollment.v
Voluntary benefits’ high cost and complexity. Most employers cite cost as the most important reason why employees do not enroll in voluntary benefits products. Although standard employer-sponsored health insurance overall is still significantly cheaper than individual policies, rising healthcare costs are making it more difficult for companies to pay for health insurance. With new and more expensive technologies, novel treatments and drugs have emerged in recent years, ultimately adding additional costs to employer-sponsored plans.vi That said, with standard employer-sponsored health insurance costs so high, employers, particularly smaller employers, and employees alike often do want to pay the added expenditures for voluntary products.
Unnecessary complexity in voluntary benefits product descriptions have also historically been a deterrent. But for high product costs as well as confusing product explanations, sophisticated core technology may provide the solution. Across all lines of businesses at life insurance companies, McKinsey has found an opportunity to reduce unit operating costs, on average, by over 40% via process standardization and simplification, increased rates of straight-through processing, customer self-service, and other digital operations savings from replacing legacy core systems with modern core systems.vii The sophisticated customer self-service capabilities inherent in modernized core systems can also help simplify voluntary benefits product explanations for potential plan sponsors and employees.
The laborious claims submission process. Simplifying the claims submission process for greater voluntary benefits adoption can also be achieved via core system modernization. Group insurance companies’ current legacy administration, billing, and claims systems were not engineered for easy data exchange and rules management. A modern core system with API-first, configurable, cloud-native technology can streamline the claims submission process for all constituents by simplifying data exchange and overall rules management. AI and AI-enabled, machine learning-based models can also enable more automation and eliminate time-consuming manual processes.
Final Thoughts
For voluntary benefits to achieve greater traction with plan sponsors and employees, group insurance companies must first overhaul their education and technology strategies. Companies must first provide more frequent and personalized education to employees to explain the value proposition and potential savings behind voluntary benefits. They must also drive down voluntary benefits’ costs through new modern and efficient core systems that can reduce unit operating costs through process standardization and simplification, increased rates of straight-through processing, and customer self-service. New core systems can also reduce the perceived complexity of products through an enhanced customer experience to provide clearer product explanations and simplify the claims submission process through streamlined data exchange, rules management, and AI and AI-enabled machine learning-based models. These comprehensive changes can eliminate the longstanding barriers to widespread voluntary benefits adoption, while making it easier for group insurance companies to articulate a powerful case for their long-term value.
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[i] U.S. Bureau of Labor Statistics Report on U.S. Employee Benefits, March 2020, pg. 7
[ii] U.S. Bureau of Labor Statistics Report on U.S. Employee Benefits, March 2020, pg. 9
[iii] Voluntary Benefit Offerings in U.S. Rise 27 Percent in Wake of COVID-19 Pandemic, Aon Reports, March 25, 2021.
[iv] AFLAC Workforces Report, https://www.paycom.com/resources/blog/74-of-employees-confused-about-health-care-benefits/
[v] Ibid.
[vi] Employer Health Insurance Versus Individual Plans, medicalmutual.com
[vii] McKinsey – Digital Disruption in Insurance – Cutting Through the Noise, March 2017
