While the Affordable Care Act of 2010 (ACA) did reduce the number of uninsured Americans, it did little to help the number of underinsured Americans which has been steadily increasing. ACA reduced the number of uninsured adults by an estimated 17 million according to data from the Urban Institute, however, by 2018, and for the second consecutive year, the number of uninsured people increased by almost 500,000 people (Kaiser Family Foundation). Underinsured U.S. adults ages 19 to 64 also increased from 16 percent in 2010 to 23 percent in 2018 based on findings from the Commonwealth Fund’s Biennial Health Insurance Survey. The Kaiser Family Foundations estimates there are now 31 million underinsured Americans. Rising healthcare costs have been a major contributor to these increases.
The Centers for Medicare and Medicaid Services (CMS) reported that health care spending grew by 4.6 percent in 2018 to a per person cost of $11,172; a 31-fold increase over the last four decades. Hospital spending at 30 percent, physicians/clinics spending at 20 percent and prescription drugs at nine percent represented the largest percentages of overall 2018 health care spending. Ten percent of that spending consisted of out-of-pocket expenses including co-payments, deductibles and other amounts not covered by health insurance. For the underinsured, those out-of-pocket expenses can lead to serious financial consequences, health issues arising from not seeking care when needed due to an inability to pay, and even loss of employment due to resulting absenteeism.
Enter voluntary benefits. Intended to shift the costs of employee benefits from employers to employees, they also have the important role of giving workers a practical, cost-effective way to fill gaps in their employer-sponsored insurance benefits and meet their individual needs. Brokers, who understand the value proposition that voluntary benefits deliver in helping address the needs of America’s un- and underinsured, can incorporate these insights into their sales consulting and realize higher sales of these popular benefits.
The Un- and Underinsured in America
We all know what it means to be uninsured, but how is underinsured defined? A person is considered underinsured when their out-of-pocket healthcare costs exceed 10 percent of their income or five percent if the income is less than 200 percent of the federal poverty level (i.e., $22,980 for an individual and $47,100 for a family of four per The Commonwealth Fund). Of course, the signs of being underinsured are fairly obvious: Individuals have problems paying their medical bills or incur medical debt, they do not seek care or fill prescriptions when needed, and/or their high deductibles lead to medical debt loads in excess of several thousand dollars. From there, their savings are depleted, their credit ratings decline, they may seek new credit cards to pay mounting bills and, before long, they find themselves in a bankruptcy filing. Additionally, their health, neglected due to a lack of funds, may also be deteriorating leading to a serious medical condition. It’s a vicious cycle that affects far too many Americans.
You might be wondering why having employer-based health coverage isn’t adequate. Well, it is often more adequate than individual coverage but, due to rising healthcare costs, many employers are now asking employees to assume a higher share of their costs in the form of higher deductibles—now one of the largest factors in driving up the numbers of employees who are underinsured, which more than doubled over the period from 2003 to 2016. By offering voluntary benefits, many employers have been able to help alleviate the problems of their un- and underinsured employees.
Voluntary Benefits Filling the Gaps
There is a reason why voluntary benefits, and specifically certain voluntary benefits, continue to grow in popularity. They provide a much needed solution to the problems of the un- and underinsured, while also offering employees a way to meet their individual needs. A 2019/2020Voluntary Benefits and Emerging Trends survey found that 79 percent of employers are expanding or enhancing their voluntary benefits portfolio. Among the most popular of the voluntary healthcare related benefits are accident coverage, critical illness insurance and hospital indemnity plans. Employees view these insurance plans as a way to supplement their employer-sponsored health insurance, gain more competitive rates, and customize the additional protection they need based on their life stage, family circumstances, overall health, etc. For employers, offering a comprehensive suite of voluntary benefits—both healthcare-related (e.g., the aforementioned accident, critical illness, hospital indemnity plans, and cancer, short- and long-term disability, dental, vision, etc.), financial protection (i.e., term life insurance), and quality of life offerings (e.g., identity theft, legal services, personal loan debt, pet insurance, gym memberships, etc.) helps them attract and retain employees while shifting benefit costs to their workforce. For brokers, helping employers address their un- and underinsured workers’ needs by offering voluntary benefits is a new strategy for building long-term relationships and increasing revenues.
Leveraging Voluntary Benefits to Help Clients Un- and Underinsured
Armed with more information and insights regarding the un- and underinsured, brokers can more effectively raise this need to their clients and demonstrate how voluntary benefits can help their employees. Key messages that could be conveyed are that, by offering various voluntary benefits, an employer can:
- Help alleviate employees’ financial stress and support their mental well-being
- Encourage employees to seek medical care when needed and minimize the risk of a small problem escalating into a very serious medical problem
- Protect employees’ life savings
- Prevent employees from ruining their credit ratings and even having to file bankruptcy
- Give added protection to employees without the business incurring additional costs
- Improving employees’ perception of the employer leading to higher employee morale, productivity and retention
For brokers who haven’t been selling voluntary benefits, they should know that many of these benefits offer a high upfront commission which, thereafter, levels off to what is still higher than the commissions most health plans offer. For example, a voluntary accident insurance plan could provide a 60 percent commission up front which subsequently drops to approximately 10 percent—which is higher than the three to seven percent most health plans provide in commission.
Having another impactful argument in favor of employers broadening their voluntary offerings is in every broker’s best interests. When you can cite a real problem facing millions of un- and underinsured Americans and give employers a way to help them, that’s the best reason of all.