SHAMWOW ALERT: I'm Not Here to Help You Sell Your Product, Mr. Voluntary Benefits Provider...

Warning - HR Capitalist opinion ahead which many HR professionals will not agree with....

Topic - "Voluntary Benefits", defined as benefits in which the employee pays all of the cost, provides employees with options for benefits and insurance coverage they might not otherwise be able to afford.  The affordability of such benefits is usually enhanced by the fact that employees can often pay for voluntary benefits with pre-tax dollars.

It's back on my mind again after reading this from William Strahan at Human Markets:

"The first offer was to offer free administration of our health and welfare plans.  The administrator would also provide access to their suite of voluntary benefits (auto, home, pet insurance and the like).  They say this with a straight face.

The second offer is even more insidious.  They will provide my employees discounts on electronics – their focus is on computers.  They will help our employees bridge the digital divide.  The employee can even pay for the merchandise over time.  How?  Through payroll deductions.  In a variation on this theme there is no direct purchase of merchandise but there is a debit type card set up.  Again the payments come directly through payroll deductions.

Reasonable people can disagree.  All of these pitches came with lists of current clients that are very impressive.  In my view however, this is a pretty clear market transaction.  I am selling these companies access to my employee base as a sales channel with a built-in collection agency.  The economics 0f this for the vendor seem amazing.  The employer does the heavy lifting of branding and marketing to a group of people with steady jobs and provides an authorative mechanism to provide payment.  The normal risks of extending credit and running a retail operation vanish.  By lowering the risk profile of the sale, the vendor gets a much more profitable operation.  As for the administration vendor – they provide a real service but also get marketing access to sell more services to the employee group."

Sounds noble, right?  Read William's entire post for his view of the drawbacks. Here are a few problems from my view that are often overlooked:

-Voluntary benefits usually include benefit classes like supplemental life insurance, long-term care and auto/property insurance that can have wildly variable cost structures based on the provider and the demographics that are insured.

-HR shops don't do RFPs that closely canvas each class of voluntary benefits.  They usually are hit by a comprehensive provider like an ADP, which provides a package of voluntary benefits with some high margin products built in.  If an HR shop doesn't do a comprehensive provider of the benefits, then they are usually assaulted by the bank or insurance agent with the most aggressive marketing strategy.  In that scenario, HR people are often bad at saying no.

-Everyone, including the employee and the voluntary benefits provider, loves the concept of voluntary benefit costs being automatically deducted from their paycheck.   Employees love it for the convenience and the fact they don't have to track it.  The providers love it because they don't have to collect money.  Once the automatic deduction is in, it's hard to get out.

Put all that together, and it's complicated.  Here's the biggest issue I have, and one of the reasons I haven't opened my shop up in a big way to voluntary benefits since I arrived at my current company - I feel responsible for the solicitation.  If I'm going to open up our employee base to a voluntary benefit, for which the employee is going to pay 100% of the cost, I feel like I am VOUCHING for its quality and value across the marketplace.

And there's no doubt that employees expect you to be looking out for their best interests.  So, they take the voluntary coverage, if available, often without shopping. 

If I am going to allow an auto insurance product to be marketed to my employees through our normal channels, I feel like I need to say the quality/price combination is the best in the marketplace.   And that, my friends, is hard to do.

And that's why I traditionally have said no to the concept of voluntary benefits. 

Comments

[Bryon Abramowitz]

Depending on the business you're in, it may or not make sense to offer 100% voluntary benefits for which you take on the role of payment broker. At a previous employer we offered some voluntary benefits from key providers because they were our clients - allowing us to promote the concept of scratching the back of the hand that feeds you. In this case it made business sense for us to do this. Unless there is a true value prop for the employer, I'm in complete agreement with your position.

[Kris Francis]

I know many local organizations that use voluntary benefits and say their employees are happy with the service. But when I sit down with those carriers, I am not convinced they are the best bang for the buck for my employees. I haven't seen a comprehensive product at a reasonable price. Instead, I see a lot of `a la carte products, each with their own price tag. My employees are a great group of people, but they aren't psychic. They often don't know whether they will need cancer, longterm care, intensive care, surgery or maternity benefits in advance. But if they choose wrongly, they pay out and they get nothing.

If my employees come to me and demand voluntary benefits, I'll be glad to make that happen. But until that time, those sales calls are going to voice mail.

[ShamWow]

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[George]

I work for a supplemental insurance company and I will not mention its name.

I have spoken to many clients and especially the larger corporations with greater than 10,000 employees voluntary benefits are a great business choice. Policies provide for the gap major medical does not provide, co pays, deductibles, and other expensive out of pocket expenses people are stuck with.

I haven't spoke with one HR Director of Benefits who hasn't said that price isn't a consideration on their benefits package. That being said there is a line to be drawn between price and quality of benefits. If you say you're looking to put your stamp of approval on your benefits package how do you feel knowing that you don't have the best available? When price becomes an issue it changes everything.

Voluntary benefits are available to everyone but because of Corporate policy only one provider may make their products available to its employees. If there was a way to offer choices of more than one provider then the market would be much more competitive and we would see prices and products become much more competitive.