ACA & The New Normal

Connecting the Dots to Financial Security

As the cost for protection shifts to the employee, the value remains essential

by Phyllis Falotico

Ms. Falotico is Head of Group Marketing for The Guardian Life Insurance Company of America, New York. Connect with her by e-mail: [email protected] Visit www.guardianlife.com.

The landscape of employer-paid benefits is ever-changing. The effect of the Affordable Care Act, coupled with new healthcare regulations, has caused a shift in the marketplace.

More and more protection products that were once paid by employers are now being borne by employees. As a result, it’s imperative that workers have a clear understanding of available options at the workplace so they can make the most informed decisions about their employee benefits.

The role of voluntary benefits with a company’s benefits program is clear. For employers, it provides a way to augment the program without adding significant cost; for a workforce that’s becoming increasingly diverse, it’s a convenient and often less costly way to achieve financial freedom.

Guardian’s third annual Workplace Benefits StudySM revealed that workplace benefits remain a foundation of financial security for many American households. Despite ongoing change in how employers manage benefits, employees continue to value the financial protection products they receive via the workplace.

Workplace Benefits Are Highly Valued

Employees increasingly report that their benefits play a major role in how secure they feel about their finances, with 42% suggesting they rely on their workplace benefits for all or most of their financial preparedness. Not surprisingly, those who rely on workplace benefits for their financial planning report higher benefits value index scores.

Most employers, however, seem to underestimate whether benefits are positively impacting employees’ overall financial security. Employees place greater weight on their benefits in this regard (65%) compared to employers (54%).

Given that employees are motivated to make the most of their workplace benefits, it’s important that employers offer options that serve a wide range of circumstances and needs. Voluntary products are an effective way for companies to offer employees benefits at a reduced cost while enabling employees to get protection that meets their specific needs.

Many Workers Remain Under-Insured With Insufficient Retirement Savings

Ultimately, too many employees drop the ball when it comes to workplace benefits because they do not realize that the basics of good financial health and security begin with what’s offered at the workplace. It is important that employees know when their open enrollment is taking place, understand what’s being offered, and realize how each insurance option can help meet their specific needs.

For example, employees should understand that health insurance will not cover every medical bill but that purchasing critical illness or accident or cancer insurance may assuage some of the financial difficulties resulting from care that is not covered by health insurance.

Most Americans have access to medical insurance for themselves and their families, primarily through an employer-sponsored plan. However, many workers do not own other forms of insurance, including disability and life insurance, critical illness policies or retirement savings plans, if not offered through their employer. One in three workers has no disability insurance, one in four has no life insurance, and one in five has no retirement savings plan.

Many workers do not take advantage of these benefits – even when their employers offer them – because of poor decision-making or ineffective education. In fact, many workers resort to a Google search to learn about insurance and savings products rather than speak to someone in HR or a financial adviser. During the open enrollment period, most workers say they consult with friends or relatives (67%) or simply rely on the benefits material distributed by their employer (77%) when making benefits selections.

Perceptions of Responsibility Differ

One in three workers has no disability insurance, one in four has no life insurance, and one in five has no retirement savings plan

Given how much workers rely on their benefits for financial security, it may not be surprising that nearly two in three employees strongly believe their employers have a responsibility to offer insurance and retirement benefits to employees.
Those who agree that their employers have a responsibility to offer benefits tend to work for larger companies with 1,000 or more employees (52% vs. 42%) and earn incomes of $50,000 or more (75% vs. 67%). Women (79%) are also more likely than men (73%) to believe offering benefits is an employer’s responsibility.

In stark contrast, far fewer employers (16%) strongly believe they have a responsibility to ensure employees’ financial preparedness.

Education is Critical

Employees need to be made aware of the product options available to them – not only for life and dental, but also for critical illness, cancer, accident, vision, and short- and long-term disability. For example, employees may not realize they can get critical illness insurance to cover the costs of visits to out-of-network specialists or non-medical expenses during recovery, such as child care or transportation to treatment centers.

Employee education, engagement and enrollment should be an interconnected process. Workers need to be prompted to think about current and upcoming life events to determine if any modifications are necessary to their current benefits.
Employers should implement a multi-channel process that uses a combination of approaches throughout the enrollment process to provide employees with the knowledge to make the right benefits choices. Decision support tools, emails, in-person presentations, videos and online enrollment are all important education channels.

Employers Strive To Balance Cost While Meeting Employee Needs

Compared to last year’s Guardian Workplace Benefits Study, fewer employers are relying simply on cost shifting – or increasing the amount employees have to pay for their benefits. While employers are less likely this year to indicate that cost-shifting is a major benefits strategy, fewer also say they plan to replace company-paid benefits with voluntary products. Rather, they may add voluntary benefits to enhance their benefits package and offer more services, but not in place of existing employer-funded or contributory plans.

Outsourcing Allows Employers to Offer Broader Benefits Packages

Employers that outsource some or all of their administration tend to offer a wider range of benefits. They are more likely to offer core benefits like medical, dental, vision, life, short-term disability, and long-term disability. They are also more likely to offer accident and critical illness insurance.
It’s important that employers select brokers that can offer diverse product offerings and education that showcases how employee benefits play a vital role in protecting against uncertainties and utilizes innovative technologies that support enrollment.

The growth in the voluntary benefits market means new opportunities for advisers in the benefits business. Although costs for various types of insurance may be shifting from employer to employee, working Americans still have the same needs to protect themselves. The workplace, as it has for many years, continues to be the foundation where employees can get the protection they need. ◊