Redefining “Robust” Benefits

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.

 

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