Worksite vs. Voluntary Benefits

The terms Worksite and Voluntary benefits in the insurance industry can and have been widely misused for some time.  Employers are lost over the difference between the two. Do a Google search for these names and the insurance marketplace will even do a poor job of deciphering the differences!

Worksite premiums have increased from $2 billion worldwide in 1997 to $5.4 billion in 2009.  Shifting costs from an employer to employee, Healthcare Reform and expanding product lines are just a few reasons why our community is seeing an increase.  One question that seems to keep coming up is what really are “worksite” products vs. “voluntary” products.

Historically, it’s safe to say worksite products have their roots in individual insurance products, while voluntary products have their origins in group products. You can see however, that over time a relationship emerges between competing theses and this is reflected in “hybrid” products that combine some of the principals of group and individual insurance.

First, a worksite product is built around several key items—the benefits it offers, the processes that support it and the compliance required by regulators. Are the benefits any different in worksite or voluntary? Not in my eyes. A death claim is a death claim. A disability is a disability, and although there are vast differences in the definition of disability between products, these differences have nothing to do with the worksite/voluntary distinction.

Products like critical illness and accident are often referred to as worksite products, but in reality that is because they have historically been marketed by carriers whose roots are in individual products. There is nothing about them that is intrinsically “worksite.” The one type of product that’s remained firmly in the worksite camp is permanent life, which has very different characteristics. These products might be cloaked as universal life, whole life or “permanent term.”

Characteristics that keep them in the individual column center around the cash value and accompanying regulation, including state replacement regulations and federal tax exchange rules. And because of the cash value element, plus the lifetime level premium expected of the product, permanent life portability has more meaning. For example, a covered person who doesn’t bother to port their critical illness product might lose insurability or issue age pricing, but a covered person who fails to port their permanent life plan might forfeit thousands of dollars’ worth of account value as well.

What about the processes supporting products? Again, permanent life stands out because it requires much more thorough tracking of individual account values. Many group voluntary products are, in fact, self-administered by employers, much like employer paid group plans. Group voluntary carriers typically don’t roster much information about their certificate holders, beyond basic coverage elections and contact data. What does all this mean in the eyes of our customers? In my opinion, neither employer decision makers nor employees give this distinction any thought.

If an employee sees a product as a benefit, they’re not thinking about whether it is worksite or voluntary, or who is administering the product. They want good products conveniently available at work. Our responsibility is to help employers identify and deliver that value. I often hear voluntary products are not as “shopped” as traditional employer-paid group products, because they’re more difficult to compare. I’m not at all convinced this is true. It seems to me that clouding the picture with a distinction between worksite and voluntary is just code for keeping customers confused.

I think we can do a responsible job of assessing the value of products employers choose to enable so employees can buy and pay for them. We should base this on the merits of price, coverage provisions and supporting service.

 

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