Involuntary Impacts of Voluntary Insurance

NEOS blog on the impacts of voluntary insurance

I know what you’re thinking. Not another article about the impacts of ever-increasing healthcare costs or strategic cost-shifting tactics used by employers still in recession recovery mode. Worse yet, how about another smarmy passage on the virtues of managing the anxieties introduced by impending healthcare reform or on financial stress in general for that matter. No, this article is written for that stalwart group who must make sense of these issues and put them into an insurance context while providing the products and services that we’ve come to count on when we need them most. This group is, of course, the employee benefit insurance carriers. For them incorporating voluntary insurance products into their overall offerings is well…. involuntary in the current climate.

So, what does a typical carrier face when considering offering voluntary products?

In many respects, incorporating voluntary coverages into your product set is a great opportunity. Traditional voluntary offerings supplementing a core benefits package allow employees to customize based on need. Employers (customers) purchase plans that fit their needs while employees (also customers) get appropriate coverage. Additionally, non-traditional voluntary offerings (legal, pet, etc.) open the market to product innovations seldom seen in the insurance industry.

Alas, the dark side of voluntary product offerings lies in the education, enrollment, claims processing and policy administration activities required to support them. With a voluntary product set, carriers must manage cases at the participant level instead of the traditional plan and class level. For many carriers, this introduces participant detail into legacy processes and systems that they may not have been designed for.

Overall, carriers with successful voluntary offerings have business architectures that:

  1. Offer a balanced plan for employers  by identifying the correct mix of voluntary and traditional employer provided plan features to achieve their objectives. Every plan is different. How much of which benefit costs need to be shifted? Will your voluntary offerings be held separate from your traditional offerings or will they be offered as “power-up” options in a more integrated plan? What impact will the plan have on employee satisfaction? Are your underwriting and product modelling tools positioned to support this?

  2. Position employees to make the best decisions  by providing education and insights so that they can identify and manage individualized risks. Traditional plans have handled these decisions for employees in the past. Under a voluntary plan, employees will need the tools to help them balance their own risk and affordability. Are your product education tools and materials suitable for audiences beyond the corporate benefits specialist?

  3. Invest in underwriting, policy administration, and claims systems and processes to support what has the potential to become a much more complicated plan, class, and participant configuration. Underwriting is complicated by the individual profiles that make up the subset of participants who opt for every voluntary feature in every combination. Billing and claims processing are similarly affected. For carriers, voluntary offerings necessitate a shift in maintaining detailed participant information from enrollment to claims events. Indeed, incorporating voluntary features drives carriers to answer questions such as: How flexible is your product model? How extendable are your legacy systems?

  4. Address the increased complexity of enrollment in a manner that allows carriers to tie the bulleted items above together, efficiently. Whether enrollment is handled by the carrier or by an enrollment partner, voluntary features require enhancements to enrollment tools and materials. They also drive the need to channel detailed participant information into the back-office systems that otherwise wouldn’t happen until a claim was filed.

Obviously, each of the four broad topics listed above represent a small feat in summarization. In the real world, insurance providers face intimidating enterprise specific complexities with daunting necessities for success that drive the ever-elusive competitive edge. At NEOS, we believe that for providers, voluntary products are a reality of the contemporary market. The journey they represent can be significant and, as with all such journeys, the best first step is to be sure to know where you’re starting from as well as establishing where you’d like to go. In the end, one always influences the other.