Employers can attract and retain talent by paying for supplemental benefits for employees while enjoying the advantages of 100% enrollment

Key Takeaways

  • Employer-paid “voluntary” benefits are trending as a supplement to employees’ health plans
  • Advantages of employer-paid benefits:
    1. Coverage for 100% of employees
    2. Relatively inexpensive for employers 
    3. Better pricing from insurance carriers
    4. High-deductible plan adoption strategy
    5. Differentiated employee benefit

Attracting and retaining employees is one of the biggest considerations for employers right now. Month after month, Americans are quitting their jobs in record numbers, and companies are struggling to find new hires and keep people on the payroll.

Today’s employees are using benefits more and more as a deciding factor in their job search. So, one significant step employers can take to attract and retain good employees is to offer employer-paid critical illness, hospital indemnity, and accident coverage. These benefits have traditionally been used to supplement workers’ health plans at their own expense but supplying them to your entire workforce is relatively inexpensive and ends up being a very cost-effective strategy to demonstrate support and stand out as an employer.

This guide will walk through how these benefits work and the advantages of employer-paid vs. voluntary benefits.

What are employer-paid “voluntary” benefits?

Voluntary benefits give employees the option to enroll in payroll deducted policies, including hospital indemnity, critical illness, and accident coverage. These are supplemental to health insurance and other traditional benefits the employee receives via their employer-sponsored plan.

If a worker suffers an accident, has to stay in the hospital, or receives a critical illness diagnosis, they receive money that they can use for any expense they choose. These benefits provide significant financial protection — especially since the average health plan deductible is $1,669, while almost half of Americans say they would have trouble affording a $400 unexpected expense.

More and more employers are opting to pay for these historically voluntary benefits to give employees extra support. So, when the worker receives a check after an accident, the employer is paying for that benefit instead of the worker. This means employees don’t have to decide whether to enroll in these supplemental plans and add yet another deduction taken out of their paychecks each month.

Top 5 advantages of employer-paid benefits

In the current job climate, employers should do everything they can to stand out and keep attracting and retaining talent. Employer-paid benefits help them show they care about their employees’ well-being and are a cost-effective way to do it. Here are five great reasons to transition from voluntary to employer-paid benefits:

1. 100% enrollment

Voluntary benefits offerings typically don’t experience high levels of enrollment. Employees look at everything already coming out of their paychecks, from medical, dental & vision to life & disability insurance — and often choose not to add another contribution. So regardless of the opportunity cost of foregoing enrollment, employees often don’t sign up.

With employer-paid plans, the employer ensures that 100% of employees are given these extra protections. They are also helping with enrollment fatigue that can be overwhelming to workers — one survey from VOYA found that 72% of employees eligible for benefits would rather service their car, visit their dentist, or get ready for taxes than review benefit options. Offering employer-paid voluntary benefits removes this burden.

2. Employer-paid supplemental benefits are relatively inexpensive for plan sponsors and free for employees

Employers can understandably have a negative initial reaction to employer-paid benefits. After all, they already spend a lot on employees, so why would they add this extra cost? The truth is, supplemental benefits are inexpensive for employers. 

Say an employer’s cost for one employee’s health coverage is $6,000 per year (80% contribution toward $7,500). Supplemental benefits may cost as little as $30 per month (or $360 per year). This makes up6% of that average benefits cost, so it’s basically adding about one year of inflation to what you’re paying per employee. 

When you look at the amount of coverage you can buy for critical illness for a low premium amount versus what you get for a dental or vision plan, it’s a lot more bang for your buck. When an accident or critical illness event happens, it’s a lifesaver for employees. This is a great way to stand out as an employer who cares without having to spend a lot of money. Plus with the BeneRe model, all underwriting profits are returned to your benefits program for reinvestment, further lowering the cost.

3. Carrier discounts

There are also discounts from insurance carriers for employer-paid plans. With voluntary benefits, the carrier can’t really know how many employees will enroll. This uncertainty causes higher pricing for potential adverse selection. When the employer says they’ll cover all their employees, that price comes down because the insurance company knows that the employer will cover every person on the census.

So, say that the carrier discount lowers the cost 10% to 15% with an employer-paid plan. Then, going with BeneRe, whose model ensures that whatever is leftover at the end of the year comes back as dividends, you could get an additional 20% to 25% dividend. This would easily approach a 30% to 40% overall cost reduction.

4. Employees may opt for high-deductible plans

Some employers are deciding to offer employer-paid benefits as an incentive to enroll in high-deductible health plans. So, people will enroll in the HSA compatible offering instead of the lower deductible plan, which also helps the employer’s bottom line. When people are looking at the high deductibles, it helps if the employer is building a safety net for many of the more catastrophic claims scenarios. Plus, unlike employer HSA contributions, the coverage will remain in force rather than employees potentially withdrawing HSA savings for non-medical expenses and incurring penalties. 

Employees are more likely to opt for low-deductible plans (often being “over-insured”) if they don’t have those extra benefits from the employer. Employer-paid supplemental coverage helps offset the high deductibles typical with CDHPs as well as out-of-pocket maximums.

5. Shows employees some love

Employer-paid supplemental benefits are an inexpensive way to beef up a benefits package to show employees that you have their back. With all the uncertainty around the pandemic and oncoming variants, it’s more important than ever to help workers build a safety net to remove some of that uncertainty. 

You are showing employees that you recognize their concerns and the uncertainty caused by today’s health environment. They can’t push aside stresses about medical costs and finances when they clock in. The more you help them with financial fragility and fear, like high deductibles and tight household budgets, the more you are supporting them and standing out from other employers. It builds goodwill, and you’ll get credit for the supplemental check they receive after a diagnosis, hospitalization, or accident. You are communicating that you think this extra support is important enough that you will pay for it.

Two-thirds of bankruptcies are caused by medical issues that lead to financial trouble. Medical bills related to accidents and critical illnesses can be outrageous. By helping them cover these costs, you’re showing workers that you want to support them, and it’s a big differentiator as an employer. 

Voluntary benefits from BeneRe

Our research and experience at BeneRe has shown that only 5% of employers are going the employer-paid supplemental plan route. That means you will stand out from 95% of employers who are not doing it. It is an incredible way to show employees you care while improving your retention efforts as well.

We offer voluntary benefits to large employers via a group captive insurance program in which all employee premiums are paid directly to the A-rated carrier in exchange for fully insured policies. Any underwriting gains are distributed back to employer health insurance programs on a pro-rata basis. 

Reach out to BeneRe for a complimentary financial analysis of in-force programs today.