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More than 300 organizations shed light on how they design voluntary benefit programs.
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towerswatson.com
As companies rethink employee value propositions (EVPs) and the total rewards mix in today’s health care reform world, VBS will likely play
an even greater role in companies
of all sizes and industries.
Approximately 21% view voluntary benefi ts as important for 2013, but their enthusiasm more than
doubles to 48% for 2018.
Most employers plan to take advantage of VBS to enrich existing core benefi t plans (83%) and augment the total rewards package (74%). With the excise
tax on high-cost core health care plans launching in 2018, they need to control increasing health care costs. VBS offers some opportunities.2013
21%
2018
48%
83%
74%
VBS gaining importance over the next fi ve years
Designing the VBS product suite
Health care reform excise tax challenges
Primary reasons companies adopt VBS
For employees, the VBS model offers choice, convenience and affordability. They can access an array of options to personalize their benefi t package to fi t their lifestyles. They can select voluntary products at open enrollment or, in some cases, throughout the year and fund them through payroll deductions. And in many cases, employees pay less when purchasing products in a group-offered model.
In designing plans that fi t the needs of employees, employers focus on employee demographics (54%) and how products fi t within their total rewards (50%) and wellness strategies (44%).
VBS can be attractive to employers seeking to balance plan affordability for employees with looming excise tax
challenges on high-cost plans. Supplemental medical voluntary benefi ts offset the reduction in core benefi t value by
reducing employee out-of-pocket risk. In particular, industries that traditionally offer robust medical plans and experience
higher health care expenses, such as the Energy and Utilities sector, need to be most aggressive in reining
in costs before the excise tax effective date, January 1, 2018.
Employers report that their current VBS offerings are geared slightly more toward older employees. Today, baby boomers represent a large population in the workforce, so meeting their needs is important. However, companies reliant on younger employees should evaluate new VBS models to fi t the needs of the Generation X and Y populations as well — by nature, both embrace customized programs.
The 6 most prevalent VBS offerings
include 3 traditional supplemental medical insurance
options (vision, dental and accident), 1 traditional wealth (disability), 1 traditional security (life insurance) and 1 personal (discounts/perks). The top emerging VBS offerings under consideration include one wealth option (fi nancial counseling), one supplemental medical option (critical illness) and one security option (identity-theft protection).
Born between 1946 and 1964
Baby Boomers
Born between 1965 and 1980
Generation X
Born between 1981 and 1999
Generation Y
Born before 1945
Traditionalists
34%
29%
40%44%
VBS can be introduced as a lower-cost alternative in a high-cost plan, if implemented appropriately.
VBS are more geared
toward baby boomers
today (as noted right),
but personalized benefi t
designs appeal to younger
generations.
VBSMore employers will turn their attention to Voluntary Benefi ts and Services (VBS) over the next fi ve years. VBS meet employee needs by addressing concerns across four critical life needs: supplemental health, wealth accumulation, security and unique personal interests or requirements. Supplemental health benefi ts foster employee and dependent well-being while mitigating risk at a reasonable cost. Wealth products protect income and assets; security products protect survivors,
the vulnerable or one’s identity. The fi nal category covering personal products provides convenient access to desired insurance coverages and other services that the employee perceives as personally important.
In the spring of 2013, Towers Watson surveyed more than 300 U.S. employers to determine how they use and deliver voluntary programs now and over the next fi ve years.
54%
50%
Employee Demographics
44%Wellness
Strategies
TotalRewards
Trends in Voluntary Benefi ts and Services