The Future Of Group Benefit Plans
By: John McMeans
Today’s employees are looking for more than just a great job. Total compensation packages – including comprehensive benefits – are also very important and employers need to be ready to meet these needs to attract and retain top talent.
Despite the challenges associated with developing cost-effective benefit plans, there are solutions that provide an opportunity for employers to add leading edge benefits and achieve differentiation, while still managing costs. One of the easiest to implement options relates to adding individual insurance products to an existing benefits package.
While there is tremendous focus on extended health and dental coverage, job sharing, tuition reimbursement, and alternative compensation arrangements, less time is spent on addressing the opportunities offered through life and living benefits options.
These types of insurance may well represent the single biggest differentiator an employer can provide. Employees in today’s society have to deal with and be prepared for the reality of critical illnesses, the increased incidence of disability, the rise of elder care, and, in all likelihood, increased reliance on employers for assistance and support. Employers need to be aware of these issues and provide solutions that help answer these concerns.
Integrating individual benefits – such as critical illness, disability, and long-term care insurance – into an employee benefit plan is a relatively new concept. Traditionally, employers have looked almost exclusively at group benefits to address the needs of their employee base.
However, as costs escalate, employee needs change and workforces evolve so it is increasingly difficult for an employer to serve all the diverse needs of its workforce with a generic group insurance plan. Different employees require different benefits and one size does not fit all anymore.
For example, executives or key employees may need, or be entitled to, a more comprehensive offering. These enhanced offerings are often better served by individual insurance rather than group plans. Conversely, contract employees who are not eligible for group benefits could be eligible to participate in individually owned benefits provided through the workplace.
Ultimately, integrated benefits deliver both group and individual insurance solutions to employees in a consolidated manner. This concept allows employers to balance their desire to deliver high quality, competitive benefits while managing costs and addressing the needs of the staff base. In short, it enables a level of customization not previously attained.
There are several examples of applications where introducing an integrated offering could work. Some ideas involve enhancing executive disability coverage to offset the limitations of basic or standard group coverage, creating alternative retirement planning vehicles through universal life insurance plans, enhancing executive and employee plans to provide critical illness benefits, and providing access to living benefits products that address the financial concerns surrounding long-term care.
Middle to high income employees often have needs that are different from the rest of the employee base. Whether it be bonus or incentive compensation that is not covered by the group long-term disability insurance plan or the need for alternative retirement planning investment vehicles, employers have an opportunity to address these needs with individual insurance and build sophisticated benefit plans that their key employees can value.
Fulfilling these needs is not always best served, nor possible, via changes to the existing group insurance plan. Barriers include increased risk, costs, and limitations of conversion. An individual insurance plan can fill these gaps and provide additional features such as contractual and pricing guarantees and portability of coverage even if the employee leaves the organization. However, these features must recognize the needs of a mobile workforce and, in turn, create a valuable benefit package for an employer to use in attracting talent to their organization.
Individual insurance plans have design features that enable employers to manage risk, costs, and quality in a way that group insurance does not. Because individual insurance can be purchased with long-term rate guarantees, an employer can predict its future expenses with more certainty than group insurance.
Continue The Coverage
Transferring some of the benefits offered from a group insurance plan to an individual insurance platform can also allow an employer to stabilize upwardly rising group insurance rates and reduce the future volatility of these rates. Additionally, contract guarantees and portability enable employees to continue the coverage under these plans beyond their employment. This can assist employers in severance negotiations and employee attraction.
By bringing individual benefits to the worksite, employers can radically change the traditional availability of individual products to the consumer. With fewer advisers marketing door-todoor, employers can capitalize and win goodwill by delivering awareness and education and using their scale to bring high quality benefits to their workforce. Employees gain from volume discounts, underwriting concessions, payroll deduction, and the security that their employer is endorsing the program.
Employers, in turn, gain from providing leading edge benefit programs that attract and retain talent, meet the diverse needs of their workforce, and allow for the management of future costs.
Integrating individual insurance options into a group plan can be implemented through mandatory or voluntary programs with or without medical evidence depending on the size and characteristics of the group.
John McMeans is regional vice-president, central region, RBC Insurance.
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