Importance of voluntary benefits to surge

As the United States prepares for healthcare reform, almost half of American employers anticipate that voluntary benefits and services (VBS) will become a more crucial part of their rewards strategy in the coming years.

A 2013 Towers Watson survey reveals that the percentage of employers that expect VBS to be a very important aspect of their total rewards package will more than double over the next five years, jumping to 48% in 2018 from the current 21%.

The main reasons companies implement voluntary offerings are to provide customized benefits that fit employees’ needs (83%) and to enrich their total rewards offerings (74%).

The most common voluntary benefits employers currently offer include life (94%), vision (84%), disability (80%), dental (80%) and accident (68%) insurance, according to the study.

Employers are also thinking of adding other voluntary benefits by 2015. The top offerings being considered are critical illness, identity theft and financial counselling.

“VBS can be attractive to employers seeking an affordable way to reduce employee out-of-pocket costs while providing clear value to their employees,” says Mark Bilderback, senior healthcare consultant with Towers Watson.

Voluntary benefits also offer advantages for employees, such as choice, convenience and affordability. Workers can select from a group of options to customize their benefits package so it fits their lifestyles.

They can choose voluntary products at open enrollment or throughout the year and then fund them through payroll deductions. Employees usually have a price and underwriting advantage because they buy products at the group plan rate.

When designing plans that match the needs of staff members, employers focus on workforce demographics, the way products fit within their total rewards and wellness strategies, according to Towers Watson.

When it comes to employee demographic groups, employers think their current voluntary benefits best meet the needs of baby boomers but offer least satisfaction for generation Y.

“In contrast to older generations, generation Y employees are interested in benefits plans that are customized to their needs,” says Beth Grellner, group health and benefit practice leader with Towers Watson. “Companies that are reliant on these younger employees can evaluate new voluntary benefit and service models to fit these needs.”

The Towers Watson survey polled more than 320 U.S. employee benefits professionals from mid-size to big companies across a variety of industries.

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