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Health Plan Week

Health Plan Week covers issues affecting providers of group health insurance to employers. It is published by Atlantic Information Services, Inc. (AIS) a publishing and information company that serves the health care industry.

Voluntary benefits are becoming increasingly popular as cost-conscious employers scale back their health benefits and shift more costs to employees. For some health plans, voluntary benefits -- which encompass a range of low-premium medical benefits as well as non-health-related products typically paid for solely by the employees -- could open the door to a new niche market.

Non-health policies include accident, life, home and auto insurance as well as non-traditional benefits that offer shopping discounts, identity-theft protection, wedding protection and group legal plans. While product sales traditionally have come through brokers and even financial institutions, some large health insurers are now moving into what analysts say is a $4.4 billion-a-year market with significant growth and profit potential. According to Eastbridge Consulting Group, more than half of all employers now offer at least one voluntary benefit. In businesses with more than 100 employees, that figure jumps to 70%. In addition, 65% of employees in businesses with at least 10 employees are now covered by at least one voluntary product. And Eastbridge expects the market to continue to grow rapidly.

A growing number of health insurers have established a presence in the market by offering voluntary benefit products for their commercial accounts, including products for niche markets as well as specialty benefits bundled with existing medical benefits.

While UnitedHealth Group offers a range of voluntary benefit products to its employer clients, a separate specialty business line includes voluntary benefits such as vision, dental, life and disability for employers that package them with medical coverage. Dental, vision, life and disability are extremely popular non-medical voluntary products and among the most frequently offered by employers, the insurer says. United declined to provide finan

cial information for its specialty business unit.

Unlike many companies in the field, United takes a group rather than work-site marketing approach, channeling the benefits through the employer. At least two employees must enroll for a vision, dental or life benefit before it can be offered. But Pat Sir, president of United's specialty business, says this is a low enrollment threshold compared to other companies. The threshold for the disability benefit varies according to the employer's industry.

Sir says that United entered the business because customers typically want to deal with as few carriers as possible. The business also has tremendous growth potential, and it's a good business strategy for United "because it makes the company's business stickier when it can offer multiple products bundled into a single package," he says. It also makes the benefits more cost-effective for employers. Where it can, United offers an administrative credit when employers bundle specialty products with their medical products. While not allowed in every state, Sir says, it's available in most states where United has a presence.

United says it continues to fine-tune its specialty products. The company's current focus is on streamlining the execution of the products to create efficiencies for its employer customers and broker partners.

Niche Markets

Three years ago, Aetna Inc. acquired Strategic Resource Co. (SRC), which it rebranded as "SRC, an Aetna Company." Aetna purchased 100% of SRC's stock and paid $250 million for its insurance contracts. Long a player in the field, SRC was administering group benefit products for a niche market: hourly workers.

Mark Hanrahan, SRC marketing director, says that the company's products are tailored to the needs of businesses that employ part-time, seasonal and contract workers with typically high turnover rates who are not eligible for more traditional benefits. SRC's medical benefits are limited, although they cover most routine medical care, pharmacy, outpatient and some hospitalization costs.

SRC's primary customer is the uninsured hourly employee who has opted to take the limited medical benefit and who then adds other limited benefits, including accident, dental, short-term disability, term life and vision insurance options.

Another niche market: SRC's limited medical benefits are offered as a transition safety net to newly hired full-time employees who must sit out a waiting period before their full health benefits take effect.

SRC administers the benefits through an employer's payroll system so the employer itself isn't saddled with administering benefits for a population with a high turnover rate.

Benefits May Aid Retention, Recruitment

Other factors besides cost savings are fueling the growth of the voluntary benefits market. Such benefits offer a competitive edge in an employer's recruitment and retention efforts. Offering a wider menu of benefits -- including those that help employees fill gaps in their health coverage -- can level the playing field, especially for smaller businesses that compete with larger employers for talent.

Growing work-force diversity is also a factor. Jim Barrett, president of American Worksite Insurance Marketing Inc., says that employers are beginning to realize that a "one-size-fits-all" benefit plan doesn't work well in today's increasingly multi-generational and diverse work force. So it makes sense to offer a menu of core medical benefits plus voluntary benefits so employees can buy what's right for them, he asserts.

Employees are becoming more willing to pay for benefits that supplement their core medical package. And as employees take on more of their health care costs, supplemental medical coverage helps when a major illness strikes.

This summary was drawn from a longer article by Health Week. To read the entire article, including a more detailed description of limited medical benefits products, click here.