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by Leila Morris
• Employee Demand For Voluntary Benefits Exceeds Supply
• Communication Is Key to Successful Wellness Programs
• Legal Benefits Are More Relevant Than Ever
• Employees Need Help Evaluating Benefit Options
• Healthcare Costs Continue to Rise
• Consumers Need to Be Aware of Tax Issues that Come With the ACA
• Open Architecture 401(k)
• Mobile App Connects Members to Dental and Vision Providers
• Variable Universal Life
• White Paper On Integrating Short- and Long-Term Disability
• Multi-Media Marketing
• Insurers Contend With Low Interest Rates
• Life Insurers Are Re-pricing Universal Life
• A Coordinated Care Model
Employee Demand For Voluntary Benefits Exceeds Supply
At smaller businesses, economic conditions are making one-half of Gen Y and Gen X workers look more toward employee benefits as a solution to financial security – even if they have to fund 100% of the cost themselves, according to a MetLife survey.
“Younger workers have a different benefit perspective than older generations, particularly those in many smaller organizations that were hit very hard by the recession and are unsure about the future of Social Security,” said Anthony Nugent, executive vice president, Group, Voluntary & Worksite Sales, at MetLife.
Two-thirds of Gen Y and Gen X employees, who work for small businesses, are willing to pay more for their benefits rather than losing them. Fifty-four percent want a wider array of benefit options, even if it means paying all of the cost of voluntary benefits, such as life, dental, vision, disability, critical illness, or homeowner/auto insurance coverage, for example.
Fifty-seven percent of companies with 500 employees or more say that providing voluntary benefits is a key element of their benefit strategy compared to 43% who said so a year earlier. Smaller firms saw an increase to 31% from 26%. The survey also reveals the following:
• 44% of younger workers are interested in voluntary home/auto while 2% of small businesses offer this benefit.
• 41% of younger workers are interested in voluntary life while 20% of small businesses offer this benefit.
• 40% of younger workers are interested in voluntary disability while 8% of small businesses offer this benefit.
• 38% of younger workers are interested in voluntary dental while 11% of small businesses offer this benefit.
• 38% of younger workers are interested in voluntary vision while 9% of small businesses offer this benefit.
• 38% of younger workers are interested in voluntary critical illness while 10% of small businesses offer this benefit.
Almost three out of four small business employees would like their employer to offer financial education, but only 29% of employers offered these programs. Seventy-two percent of younger employees who are very satisfied with their benefit have a very strong loyalty to their employers compared to 46% of younger workers overall. For more information, visit www.metlife.com/sbtrends.
Communication Is Key to Successful Wellness Programs
Most employers say that weak employee engagement is the biggest obstacle to changing their employees’ health risk behavior, according to a white paper by Colonial Life. Just offering a wellness program and expecting a majority of employees to participate is prone to failure, said Steve Bygott of Colonial Life. More than half of workers say they don’t know enough about their company’s wellness programs to participate. A Colonial Life survey found that 52% of workers whose employers offer wellness programs are only somewhat or not at all knowledgeable about them. However, 57% of employers believe their employees have a good understanding of the health and wellness programs offered and how to participate, but only 41% of employees agree.
Ninety-six percent of employees who met with a benefit counselor individually say it improved their understanding of benefit and 98% said the interaction was important.
The complete white paper is available in Colonial Life’s online newsroom at ColonialLife.com.
Legal Benefits Are More Relevant Than Ever
Seventy four percent of people experienced at least one legal life event in the past year – up from 69% in 2007, according to a study by ARAG. These legal life events decrease productivity and increase absenteeism. David Murray, President and CEO of ARAG said, “The anemic economy and mortgage crisis; increased consumer fraud; and higher prevalence of eldercare have become silent killers of workplace effectiveness. People need assistance preventing and solving their legal issues. For more information, visit www.araggroup.com.
Employees Need Help Evaluating Benefit Options
Fifty-six percent of employees say they waste up to $750 because of mistakes they make with insurance benefit elections. Twenty-four percent have chosen the wrong level of coverage or benefit options they didn’t need. Only 16% of employees are confident that they aren’t making mistakes during the enrollment process, according to a recent survey by Aflac. The survey also found the following:
- 89% choose the same benefit options every year.
- 65% feel that they are only somewhat prepared or not prepared for open enrollment.
- 61% are only sometimes or not at all aware of changes to their policies each year.
- 60% would be at least somewhat likely to apply for voluntary insurance plans.
- 47% rarely or never exceed deductible costs.
- 43% say rising out-of-pocket medical expenses and health insurance costs are the most important issues to them right now.
- 40% have had to cut back on social activities.
- 38% are very or extremely concerned about unanticipated medical expenses.
- 28% have not been able to take a vacation.
- 22% have had to work more hours.
- 16% say they contribute the right amount to flexible spending accounts.
Forty-nine percent of employers say they communicate very effectively to extremely effectively with workers about company benefits. But 52% of employees say that their company has not communicated with them at all about the open enrollment process. Audrey Boone Tillman of Aflac offers the following tips to communicate with employees about their benefits:
• Choose the right products. Ask employees what they need and want in order to get the right mix of benefit options.
• Consider including more voluntary benefit options.
• Choose the right time to market benefit offerings to employees. Plan to reach employees when they’re most receptive to learning about their options. Innovative employers use a mix of online benefit portals, agent/broker enrollment sessions, employee newsletters, lunch-and-learn sessions, customized benefit booklets, frequently asked questions, and other educational materials to help employees understand what’s available and how each plan works.
For more information, visit http://www.aflac.com/aflac_workforces_report/articles.aspx.
Healthcare Costs Continue to Rise
In 2012, the average annual per-employee cost of insurance is up 6.7% compared to 2010. That’s $8,428 in 2012 compared to $7,899 in 2010, according a Compensation Data insurance survey. Researchers say that rising costs are no surprise, given a looming nursing shortage, epidemic obesity rates, and the multitudes of Aging Baby Boomers. And there’s no foreseeable end in sight to the rising cost of healthcare.
Eighty-two percent of insurance employer sponsored PPO plans have a deductible or co-insurance. The average deductible on an employee-only PPO plan is $715, compared to $1,432 for an employee plus family plan. The average in-network out-of-pocket maximum on an employee plus family PPO plan is $4,393.
Amy Kaminski, director of marketing for Compdata Surveys said, “HDHP plans are beginning to make headway as employers attempt to contain rapidly increasing medical costs. The high deductible requirement translates to lower overall premium costs, making them more affordable for employers.” The use of consumer driven health plans (CDHPs) is on the rise as well. CDHPs typically pair an HDHP medical plan with a spending account. A Health savings account (HSA) with an HDHP is the most common combination – used by 46.5% of survey respondents. For more information, visit http://www.compdatasurveys.com.
Consumers Need to Be Aware of Tax Issues that Come With the ACA
As the Affordable Health Care Act rolls out, there are tax implications, potential penalties, and other considerations that may affect consumers, says Jeff Motske, president of Trilogy Financial Services. To pay for the benefits associated with the healthcare mandate, Congress has imposed new taxes and penalties on the wealthy, the healthcare sector, and on those who refuse to purchase health insurance (an estimated 32 million Americans). Many people are finding that state exchanges may be a good fit, due to potentially hefty federal tax credits that could help lower costs (the credits will be based on income and family size).
Those who don’t buy insurance are subject to the following penalties, which grow more severe in time:
• 2014 – $285 per family or 1% of the family’s income, whichever is greater.
• 2015 – $975 per family or 2% of income, whichever is greater.
• 2016 and beyond – $2,085 per family or 2.5% of income, whichever is greater.
Next year, the individual payroll tax for Medicare will increase from 1.45% to 2.35% for every dollar earned over $200,000 ($250,000/year for married couples). A 3.8% tax may be imposed on unearned income generated by dividends, interest income, capital gains and other forms of passive income, depending on your modified adjusted gross income.
Motske says that some investors are reducing their risk of paying higher taxes by selling stocks and bonds with capital gains and even selling businesses before the end of the year. Even those who earn less than $200,000 a year could face greater tax consequences if their net investment income or retirement distributions puts them over the $250,000 mark.
Also, he says that some may want to convert their IRAs into Roth IRAs before year’s end.
For more information visit www.trilogyfs.com.
Open Architecture 401(k)
SCI Companies enhanced its 401(k) solutions to address common employee objections to plans. RBF Capital Management will offer open architecture plans that allow employees to design their own retirement plans from a greater spectrum of investment options. Another advantage is total transparency of provider fees. For more information, visit http://www.scicompanies.com.
Mobile App Connects Members to Dental and Vision Providers
Guardian members can now locate dental and vision providers with the Guardian Anytime Mobile app for iPhone and Android. Android and Apple users can download the free app from www.GuardianAnytime.com. Members can locate in-network dentists from one of the nation’s largest dental networks and vision providers from both VSP and Davis Vision. Members can search by name and location for contact information, interactive maps and driving from anywhere in the country. For more information, visit http://www.aboutemployeebenefits.com.
Variable Universal Life
Lincoln Financial Group introduced its next generation variable universal life insurance product, “Lincoln VULONE.” It provides a guaranteed lifetime death benefit along with the potential to build market-driven cash values, which can serve as a source of supplemental income. It features a competitive pricing structure for various premium scenarios, including those in which premiums are paid in five years or less. It’s the first Lincoln product that offers the new Lincoln LifeEnhance Accelerated Benefit Rider. In cases of a permanent chronic illness, clients can access up to 100% of the gross death benefit at the time of claim through payments. For a terminal illness, policyholders can access 50% of the death benefit up to a maximum of $250,000. For more information, visit 800 444-2363 or go to www.LincolnFinancial.com.
White Paper On Integrating Short- and Long-Term Disability
The Disability Management Employer Coalition (DMEC) is offering a white paper that describes seven best practices for integrating short- and long-term disability programs. The white paper is sponsored by Liberty Mutual Insurance Group Benefit. It can be downloaded at www.libertymutualgroup.com/leadershipseries.
Distribion introduced social media marketing software called, the “Quick Start Program.” Marketers can access branded, compliant-controlled sales materials and distribute campaigns over multiple channels at once, such as e-mail, direct mail, and social media. For more information, visit www.distribion.com.
Insurers Contend With Low Interest Rates
Second quarter earnings reveal that historically low interest rates are pressuring U.S. life insurers. Fitch Ratings expects painfully low rates to continue since the Federal Reserve has said that it will not bump rates up until at least 2014. Fitch warns that sustained low interest rates will limit the ability of U.S. life insurers to improve earnings and debt service metrics over the next two years. There will be a meaningful affect on statutory capital if low interest rates last more than three to five years. Low interest rates have reduced net investment income and interest margins on spread-based products that incorporate minimum rate guarantees. Low interest rates have also made it more expensive to hedge and increase employee pension liabilities and reserve requirements for a number of products. This is due to reduced expectations for investment returns and future profitability, according to Fitch. The full article can be accessed at www.fitchratings.com.
Life Insurers Are Re-pricing Universal Life
Fourteen of 31 life insurers, surveyed by Milliman, re-priced their UL with secondary guarantee design in the past 12 months. Nearly all said premium rates increased. Fifteen expect to modify secondary guarantee products in the next 12 months.
Only nine of the survey respondents met their profit goals in 2010 and in the first nine months of 2011, which may be driving re-pricing and modifications. Since 2009, the market share has increased for universal life with secondary guarantees (ULSGs). In the meantime, the market share for cash accumulation UL decreased and the market share for current assumption UL has remained flat.
The product mix has changed significantly since 2009. Ten survey participants moved away from ULSG products, with four discontinuing sales of ULSG. Seven participants moved to ULSG products, with four discontinuing other UL products.
Sales of total indexed UL and total accumulation IUL were higher in the first three quarters of 2011 than they were in all of 2010. The IUL market has drawn considerable interest recently, with more companies entering or considering entering the market.
Nearly 42% of survey respondents expect to market LTC combination plans within two years and nearly 68% expect to market an LTC or chronic illness rider in the next two years. For more information, visit http://insight.milliman.com/article.php?cntid=8149.
A Coordinated Care Model
Blue Shield of California, Dominican Hospital, and Physicians Medical Group of Santa Cruz County (PMG) created a three-year accountable care initiative. It is designed to provide integrated, cost-efficient healthcare to about 8,000 Blue Shield HMO members in Santa Cruz County. About 5,200 enrollees are members of the California Public Employees’ Retirement System (CalPERS). The collaboration is expected to result in little to no increase in healthcare costs for members in the first year and a low single digit increases in the two subsequent years. The healthcare entities will share clinical and case management information and coordinate comprehensive healthcare services. The initiative will continue for at least 36 months. The parties intend to extend the collaboration even longer in order to have a sustainable affect on healthcare costs for members and employers. The collaboration is Blue Shield’s eighth commercial accountable care organization.