Financial Wellness

Why Healthcare Reform is a Perfect Storm and How Voluntary Benefits can Provide a Crucial Lifeline

MLR's, Cadillac  taxes, grandfathering, higher deductibles and co-pays all are, increasing costs and premiums. Somewhere in this swirling chaos, there are some solutions that can help all involved: employers, employees, and their brokers, agents and consultants. After all, everyone is on the same surging wave, struggling to make sense of it all - and in need of a lifeline like Voluntary Benefits. Let's examine the raging storm - and some solutions - from various perspectives:


As employers deal with rapidly rising health costs and burdensome regulations, balanced with keeping employees satisfied with their benefit plans, here comes the Patient Protection and Affordable Care Act (PPACA). Not only does this legislation create additional confusion, it also causes many employers to brace for additional increases in their expenses, driving them to introduce Consumer Driven Health Plans (CDHP) along with Health Savings Accounts (HSA) to avoid excise taxes -- or to drop health benefits completely.


As confusing as this is to employers, think of how employees must feel as they contemplate increased out-of-pocket costs in the form of premium contributions, higher deductibles and co-pays. Even with HSA's (which may or may not be subsidized by an employer), there are still gaps in coverage, which can impact their overall financial wellbeing. Statistics show that the majority personal bankruptcies are due to medical expenses, even though more than 70 percent of people had medical coverage in place.

Brokers, Agents and Consultants

As employers search for a beacon in the storm, intermediaries are also threatened by PPACA's strong undertow and rip currents. In the small group market, there is growing concern about the impact of Medical Loss Ratios (MLRs) on fully insured plans, resulting in lower - or no - commissions. This could deliver a devastating blow, especially if there are no plans for additional product lines to offset this.

Fee based consultants are also facing revenue pressures. Organic growth is down, and competition is fierce. Clients are demanding more value-added solutions, and often at the brokers' expense. Without additional revenue, this model can be difficult to sustain.

Enter the Lifeline ~ Voluntary Benefits

Although Voluntary Benefits cannot completely stem the rising tide, they have entered the mainstream of employee benefit plan design strategies and can offer valuable solutions for everyone. Here's how:


As employers grapple with balancing new cost-saving strategies with employees' financial wellbeing, they are considering products, such as Group Critical Illness and Group Accident plans, which have gained momentum because they:

  • Help plug the gaps in coverage without being "underlying coverage", when HSA compatible.
  • Do not impact the so-called Cadillac Plan excise tax issue.
  • Are valued by employees, which may help increase adoption rates of CDHP elections.
  • Leverage wellness benefits, by increasing health awareness and participation inherent in corporate wellness programs.
  • Send a positive message to employees, while also lowering employer costs.


Instead of going under the surging wave in the storm, employees can better protect themselves and their assets (i.e. their savings, HSA's and 401k plans) with voluntary benefits that:

  • Provide valuable supplemental coverage.
  • Offer cash when it is needed most to retain control of the situation and to help offset many of the incidental expenses.
  • Are available on a simplified or guarantee issue basis, making them easy to enroll in and qualify for.
  • Include valued family coverage.
  • Enhance the overall value of the benefit plan.

Brokers, Agents and Consultants

You can offer your clients a port in the storm, by introducing some of these types of voluntary benefits:

  • HSA-compatible products, like Critical Illness and Accident Plans, which can help offset some of the employee risk and alleviate some of the employer concerns about higher deductibles.
  • Newer generation products, like GAP and Hospital Indemnity, along with Critical Illness and Accident Plans, which provide excellent plan design strategies that help plug the holes.
  • Wellness benefit riders that are included in Critical Illness and some Accident plans, which help to drive participation in testing, thereby enhancing long-term savings. For Example: Employer funds $5000 of Critical Illness for each employee (with a Voluntary Employee Buy-up Option that includes a wellness rider), under the condition that they will fund the base plan IF employees complete testing. Employer also raises employee contribution, but agrees to reduce it if the employee completes the test.  In essence this pays for the plan).

Voluntary Benefits can also include commission revenue. In many instances, commissions can now be level, providing a more predictable revenue stream and fit nicely with traditional group product compensation structures. In the small group market, consider what adding two Voluntary Benefit products like Critical Illness and Accident can do to your revenue stream.  

In lager case markets, Voluntary Benefit commissions can often be redirected to offset employer fees, or to use towards additional value-added services such as online benefit administration. For fee-based consultants, this can be significant in riding out the storm of shrinking organic growth.

While we all weather the same "perfect storm", Voluntary Benefits are rapidly gaining acceptance as a sound product set to be integrated into well-designed benefit plans. Catch the wave and show your clients the advantages of Voluntary Benefits.

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