Since the Affordable Care Act was passed in March of 2013, benefit managers have been almost single-mindedly focused on developing and refining their organization’s health care strategy. And while there is no doubt the focus on health care benefits will remain at the center of the employee benefit radar screen for the foreseeable future, there is at present a relative calm in the ACA waters (at least as this month’s column is being penned) while the dust settles from the fall 2013 open enrollment season.
As such, now is a good time to look beyond health benefits to other key aspects of an employee benefit plan, which are critically important but have demanded less mind-share in the past couple of years. After all, an employee benefit package is just that — a package. A package developed in order to equip employers with the tools needed to attract and retain key employees while, at the same, securing the financial well-being of their employees and driving organizational productivity.
To that end, many surveys have been conducted to gauge the relative importance of “ancillary benefits” to employees and employers alike. Ancillary benefits are those benefits that fall outside of the traditional medical and retirement paradigm, and in so doing, ancillary benefits provide employers with the opportunity to round out their benefit package by providing financial protection that employees need at a fraction of the costs associated with core medical and retirement benefits.
While there are a number of ancillary benefit categories — dental, vision, life, disability, critical illness, accident, etc. — the most important ancillary benefit product, at least in the humble opinion of this columnist, is disability insurance. After all, disability insurance is, at its core, income protection insurance, and I have seen instances time and time again where disability insurance provided families with the resources they needed to fulfill their financial obligations and, importantly, maintain dignity while dealing with the disabling condition of the family’s breadwinner.
Furthermore, employers who provide disability insurance avoid the very unpleasant and surprisingly likely eventuality of having to terminate the employment of a disabled employee who can no longer performs the duties of their job but needs the income therefrom to stay afloat. As far as premiums are concerned, disability insurance is a lot less expensive than most employers realize. Depending on industry and income, long term disability premiums for a plan design providing strong benefits usually ranges between $15 and $25 per employee per month.
While disability insurance is a critically important and often underappreciated benefit element, dental and vision insurance are ancillary benefits that are near and dear to the hearts of most employees and, for employers, the value of providing employees with the means to maintain proper dental and vision health has a number of benefits, not least of which is encouraging a culture of wellness and health in the organization. From a cost standpoint, dental and vision insurance is often funded through voluntary employee premiums; however, it is not at all uncommon to see employers chipping in to offset the cost of coverage.
Life insurance is also a very important ancillary benefit. Years ago, there were legions of insurance company salespeople who marketed life insurance products to the American public at large. Today, life insurance company salesforces are primarily tasked with marketing life insurance coverage to the high net-worth population. That means, for the majority of the American population, the life insurance coverage options provided by employers is the only life insurance coverage the employees will have. As such, employers are wise to offer both a basic level of coverage (which is incredibly inexpensive to offer) along with the option for employees to enroll in additional, voluntary life insurance coverage at their own expense. The low premiums and preferential underwriting protocols of group life insurance make the election of life insurance coverage through the employer the primary means through which today’s workforce obtains the coverage it needs.
While often residing in the footnotes of an employee benefit discussion, disability, dental, vision and life insurance are very important components of a comprehensive employee benefit plan. For employers who are looking for ways to enhance their benefit plan to offset the often unpleasant news associated with health insurance in light of ACA (increasing premiums, reducing benefits, etc.), examining your overall benefit plan to ensure adequate coverage in the area of ancillary benefits is a wise approach that has great potential to enhance your benefit package, bolster the financial security of workforce and encourage wellness all while minimally impacting your budget.
David Bottoms is senior vice president of The Bottoms Group and a principal of TBX Benefit Partners.