Concerns over health, finances and family dominate the working class, impacting their lives on a daily basis.

There has been a growing trend in the marketing of employer-sponsored voluntary benefits that would have you believe that “more is better” and employees demand variety so they can choose benefits to fit their unique lifestyles.

What we see now are things like prepaid legal counseling, pet insurance, travel insurance, mortgage protection, tuition reimbursement, elder care insurance and many, many more. Employers may feel like if it is voluntary, why not offer it? And we are being told consumers want these choices.  This is a slippery slope, at the very least.

A Harvard Business Review article published in June 2018 entitled “How Many Choices Do Consumers Really Want” found that consumers almost always tell researchers they like many versions of a product.  Yet, we need to go back to 2000 when psychologists Sheena Lyengar and Mark Leper from Stanford and Columbia Universities, respectively, did a famous study that upended this generally accepted marketing premise. On the first day of the experiment, shoppers at an upscale grocery store were presented with twenty-four varieties of gourmet jam. Those who sampled the product got a dollar off any jam. The next day, shoppers were presented with only 6 varieties. When the time came to purchase, people who saw the large display were one-tenth as likely to buy as the people presented with the small table.

So why did Harvard researchers find that people almost always say they want more choices? The Harvard study found there were nuances. Consumers’ perceptions of how many choices they prefer change depending on whether they intend to use a product for pleasure or for a functional need. Other studies show that there is a point when consumers get choice overload, no matter what the product or their perceived desire for more variations.

So how does this apply to your benefits strategy? First, insurance is a functional product. That means it won’t take much to reach decision overload. In his book, The Paradox of Choice, Barry Schwartz writes that when consumers have too many options, they may end up not choosing at all. Schwartz shows the results of employees who were offered fifty mutual funds, versus 5 funds, in which the employer matched contributions. Those who were offered fifty funds were ten percent more likely NOT to enroll in anything at all and walk away from the employer’s matching funds. Decision paralysis is proven when employees turn down free money from their employer.

You could end up in a similar position. Employer-sponsored voluntary health insurance benefits meet a critical need for low-wage workers, that only you can give them. You bring buying-power and vetting knowledge to the table, that employees cannot get on their own. The high deductibles and co-pays under ACA plans mean workers must come out-of-pocket with thousands of dollars to even get to any coverage. Your voluntary health insurance benefits fill that critical gap in coverage. But when an employer lumps this essential medical care coverage in with dozens of non-essential voluntary benefits, overwhelmed employees may just walk away. This is nothing short of a tragedy. Low-wage workers may be one accident or illness away from financial ruin that could have been prevented.

The bottom line is you are bringing no value to your employees by offering a smorgasbord of benefits that they could get more easily, at the same price, on their own. In fact, it is a disservice to them if they end up turning down valuable healthcare benefits because it’s too overwhelming to decide. And finally, many of these benefits are not meant to be administered in a payroll-deducted environment. So, on top of everything else, you may end up in an administrative quagmire, with angry employees.

Voluntary medical insurance is more critical than ever in the world we live in today. Not only can you provide for the health and welfare of your employees, you will find that these valuable benefits will give them peace of mind and increased job satisfaction which leads to better employee retention.

by J. Marshall Dye III 

• J. Marshall Dye III is founder, President and CEO of Insurance Applications Group, a technology-forward benefits design and marketing firm creating health insurance products for specific industries and employee groups. For more insights and helpful information, visit the IAG Benefits Resources page.

How the value proposition is shifting from substance to superficiality.

As a recruiting tool, employers commonly compete by offering what insurance companies or brokers have traditionally referred to as robust or benefit-rich plans. The term “robust” has carried an implied meaning in insurance-industry terminology: major medical insurance coverage with small co-pays for doctor’s office visits, emergency room visits, inpatient surgeries, dental, vision, and other common ancillaries.

This traditional definition of robust implied valuable and comprehensive coverage, with medical providers filing the claims, making the user-experience easy and hassle-free. This health care coverage also inspired loyalty and created a bond between employer and employee, as it demonstrated that employers truly cared for the health and well-being of their workers, by ensuring their employees would be protected medically and financially in case of any health-related catastrophe. But then Affordable Care Act changed the landscape.

The new regulations brought sweeping change to health insurance plan design, most notably the elimination of pre-existing condition limitations, followed by the removal of limits on claims liability and loss ratio parameters. These changes were constructed to help those with the greatest needs receive care, no matter their health condition or ability to pay. But consequently it changed the variables that insurance underwriters use to derive the cost of insurance based on its risk factors. Insurance companies could no longer mitigate risk through limits in coverage, that can make insurance more affordable. Employers with younger and healthier workforces were no longer able to obtain plans commensurate with lower health-risk factors. The unlimited risk imposed by the ACA has predictably translated to rising premiums, higher co-pays, and soaring deductibles.The new reality in today’s healthcare marketplace are expensive plans that require stiff monthly premiums and a lofty four-figure deductible from the patient before any medical services will be reimbursed.

Another consequence of the ACA rules was the homogenization of coverage under any qualified plan. The only difference between bronze, silver, and gold level plans is whether the premium is higher and deductible lower, or vice versa. In the end, qualified major medical plans cover all costs once a patient’s deductible/out-of-pocket maximum is met. This has rendered the term “robust,” once used to describe policies with broad and deep coverage, as meaningless. Now all major medical plans under the ACA are technically considered robust under the traditional definition, at least in terms of coverage. Even so, the least expensive of these plans, affordable to low-wage workers, created a gap in coverage, whereby they have to pay out-of-pocket for everyday healthcare needs and medical expenses before they ever get to coverage dollars.

One solution emerged to fill this gap—for employers to add affordable voluntary medical benefits for smaller, day-to-day claims. Limited indemnity voluntary plans are indeed valuable additions to an employer’s healthcare offering. The right plan can help the most vulnerable in the workforce with the common medical expenses they need most, benefits that the ACA essentially pushed out of reach.

Reaching back to the term “robust” employers can help create insurance coverage that meets this traditional definition: broad and deep coverage (through your ACA plan), and coverage for every-day medical expenses, through the right voluntary medical benefits plan.

But here is where the distortion begins. Providers of other types of non-essential benefits like gym memberships, commuter reimbursement, pet insurance, financial counseling programs, and other similar offerings are now claiming THIS is what makes for “robust” benefits. Employers are being bombarded with more and more voluntary benefits and being told that if voluntary medical insurance helps create a robust plan, then the more voluntary products offered, the more “robust” your benefits plan is. That is simply untrue. In fact, adding these superficial additional voluntary products actually dilutes the perceived value of your core medical benefits, benefits of true substance and value. As a integral part of creating a truly robust core benefits plan, you are lumping your voluntary medical benefits plan into a list of almost gimmicky coverages. This can create confusion whereby your employees decide to choose no voluntary benefits at all. And there goes your true “robust” coverage strategy for core benefits.

What we see today is an expansion of the definition of core benefits to include products and services that dilute the importance and impact of employer-sponsored medical and healthcare insurance. By experience, the more non-essential voluntary benefits an employer offers, the less the participation in the valuable, important and usable voluntary medical benefits plans. In addition, there are challenges to the effective communication, implementation, and fulfillment of valuable benefits to employees, that most non-essential benefits providers cannot provide. If you DO happen to get employees to sign up for these superficial benefits, it can be a stress on your internal systems, when the providers have trouble communicating, implementing and fulfilling the benefits. And the buck stops at you, the employer who endorsed the benefit and provider. Instead of creating the goodwill you expected, you are now facing complaints.

But these non-essential benefits can be presented as very attractive and enticing, like an all-you-can-eat buffet, with something for everyone. “It’s big, it’s impressive, Mr. Employer. It’s robust. Your employees are gonna love it. What’s not to like?”

Here is the truth. Employers provide true value to their employees, by leveraging their buying power to deliver a needed service or program at a cost an employee cannot get on their own. The worst deception is calling a plan robust, when it is not. Adding non-essential voluntary benefits such as pet insurance, identity theft protection, and gym discounts do not counterbalance for a lack of benefits that employees find usable, valuable, and affordable. Your benefits strategy may be the biggest difference between business success and failure. Don’t be led astray by headlines that read “pet insurance is now an essential benefit” to offer. Or “employees demand voluntary benefit choices.” Not only can it backfire, you may be depriving your employees of, or directing them away from, what the need the most: voluntary medical benefits of substance, voluntary benefits that meet the gaps in coverage with your ACA plan and help create a truly robust insurance plan.

by J. Marshall Dye III 

• J. Marshall Dye III is founder, President and CEO of Insurance Applications Group, a technology-forward benefits design and marketing firm creating health insurance products for specific industries and employee groups. For more insights and helpful information, visit the IAG Benefits Resources page.