Supplement Benefits
Over the last eight to ten years, supplemental health programs—such as accident, critical illness, and hospital indemnity insurance—have evolved from a consideration to a strategy that closely aligns with core benefits during open enrollment. The increased availability of supplemental health solutions is a positive sign, providing employees with a stronger safety net against the financial risks of higher medical deductibles and out-of-pocket medical expenses.
Market Growth and Trends
Supplemental benefits are as needed today as ever. The growth has been substantial:
2009-2019:
- Critical Illness: 14.12% CAGR
- Dental: 9.44% CAGR
- Term Life: 8.04% CAGR
- Accident: 5.02% CAGR
- UL/WL: 4.71% CAGR
Post-2019 (despite COVID headwinds):
- UL/WL: 7.25% CAGR
- Critical Illness: 6.41% CAGR
- Hospital Indemnity: 5.73% CAGR
- Term Life: 1.95% CAGR
The Utilization Challenge
According to actuarial filings over the last five years, supplemental health premiums have decreased, yet the voluntary benefits industry continues to face headwinds. Many employers are seeing lower-than-expected utilization with some supplemental plans. There can be several reasons for this:
- Employees forget they have the supplemental benefit they signed up for at open enrollment
- Lack of communication between the employer and/or carrier and the employee regarding their policy and annual wellness benefit riders
- Perceived complexity – employees assume filing a claim will be time-consuming, much like medical insurance, and never file
- Downward rate deviations due to a carrier’s lower-than-average claim frequency over a specific time period (usually three years, depending on the state)
- Lower operating costs among carriers
A Real-World Example
Last Friday, I spoke with a global company with over 100,000 employees to check in on their open enrollment. I met the CHRO at a focus group last year and suggested they consider a call center enrollment. She thought they could get by without it for one more year.
Her assessment? “It’s going okay, but with the changes we made, our employees may have benefited from using enrollment counselors.” This aligns with recent Eastbridge Consulting Group research indicating that employees may be shifting away from DIY benefits enrollment. Thankfully, employers and brokers have many enrollment options available. I scheduled a follow-up call with her team for January to explore their options.
The Power of Communication and “Nudging”
Last year, I spoke with a focus group of employers about their employees’ wellness benefits and the low utilization of those benefits. After reviewing utilization reports from their carriers, I found that less than 8% had filed a claim in the last three years. Each employer was self-insured, so I knew it would be feasible to go back and file claims for their employees retroactively. After discussions with the carriers, they agreed to go back three years and pay any qualified annual wellness claim.
The lesson? Communicate, communicate, and communicate often.
I discussed the concept of “nudging” with the focus group—how it has been used in the US and around the world. Many global insurance companies have employed “insurance nudging,” using behavioral science to drive specific activities that enable employees to make better decisions. For over a decade, both public and private companies have used nudging to help drive employees to look at benefits differently.
Conclusion
When an HR department conducts a survey and receives negative comments about benefit utilization, it’s actually a valuable signal. There has never been a greater need for benefit communication than now. The data is clear: supplemental benefits remain essential, but without proper education, enrollment support, and ongoing communication, employers and employees alike miss out on the value these programs can provide.
