As health reform opens up employer-sponsored health plans to more individuals, the covered population is becoming more diverse, challenging employers to offer plans that meet more diverse needs. In addition, employers are looking for ways to reduce plan cost to avoid the excise tax on high-cost plans looming in 2018. One way to accomplish this while still ensuring that employees have access to the level of coverage they want is to provide a lower-cost medical plan with supplemental voluntary coverages.
Choice promotes efficiency by allowing employees to buy the amount of coverage they need, and employers can manage their own cost by requiring higher contributions for more costly choices. Adding choice can ease the transition to a more sustainable health benefit design. Mercer’s most recent National Survey of Employer-Sponsored Health Plans found that while employers’ top two objectives for offering voluntary benefits remain helping employees take advantage of group purchasing power and giving them the opportunity to fill gaps in employer-paid benefits, over two-fifths of employers are specifically using voluntary benefits to maintain benefit options as the core benefit changes.
Does this strategy work? Meaning, will employees actually purchase voluntary benefits to supplement a lower level of medical coverage? Early results from Mercer’s private benefits exchange, Mercer Marketplace, demonstrate that they will. Mercer Marketplace is unique among private exchanges in that it offers a range of voluntary benefits on the same platform as core benefits, with built-in decision support. In the first open enrollment, employees electing high-deductible plans were more likely to purchase supplemental health coverage — 35%, compared to 24% of all enrollees.
Disability insurance continues to be the standard voluntary benefit, offered by 83% of employers. The number of employers that offer whole/universal life jumped to 49% from 34%. Cancer/critical illness insurance is also on the rise, now offered by 43% (up from 38% in 2012). About one in 10 large employers offers pet insurance; this rises to 19% of employers with 10,000 or more employees.
About two-thirds of employers have integrated voluntary benefit offerings on the same administrative platform as core benefits, up from 60% in 2012. This strategy lets employees see all sources of coverage, both employer- and employee-paid, when determining whether they have adequate protection for their out-of-pocket exposure. Asked to cite the advantages of integrating their voluntary and core programs, over four-fifths of employers said it allowed easier program administration (84%), but nearly as many said it improved employee understanding of benefit offerings (78%). For 30%, integrating core and voluntary benefits resulted in higher participation rates for voluntary benefits.