Private exchanges are becoming more prevalent and, as they do, clear trends are emerging. One such trend is the increase in the number and volume of voluntary benefits purchased by employees in a private exchange.
Employees are buying a greater number of voluntary benefits to supplement the traditional lines of insurance that have historically been offered; they’re also buying more voluntary benefits when given more options for such benefits than had previously been offered.
Based on an analysis of the Willis book of business available, we found that voluntary benefit purchasing more than doubled when employees purchased in a private exchange.
There are several reasons for this. First, private exchanges provide greater choice to employees and create an environment (often through defined-contribution funding) in which people are forced to act as consumers. This is a new development, since the manner in which employee benefits have historically been offered, paid for and communicated to employees has not fostered an environment of consumerism.
With the emergence of private exchanges—and their increased levels of choice and clear allotment of dollars to spend—employees are taking greater responsibility and control of their buying decisions. In short, the concept of consumerism is relatively new in employee benefits, and private exchanges have helped accelerate the change. When employees act as consumers, they buy what is most important to them. And as purchasing habits reveal, employees (a.k.a. consumers) have determined that voluntary benefits are an important component of their comprehensive employee benefits package.
Second, private exchanges offer more choice, with an increased number of medical and dental plans for employees to choose from and a greater suite of voluntary products to buy.
Expanded choice is important because we now have four generations in the workforce. In addition, many Baby Boomers are working past age 65. So, buyers’ needs are becoming more varied, and voluntary benefits are increasingly used to meet the varied needs of a more diverse workforce.
Third, as anyone who has enrolled in a group program knows, even two plan options can be confusing. With six, seven and even eight medical plan options available in a private exchange, this can cause even greater confusion.
Today’s private exchanges are helping reduce this confusion with robust decision-support technology that helps employees to sort through their options and make the best decisions based on their unique needs. These recommendations often include voluntary benefits.
Most significantly, as medical plan deductibles and out-of-pocket levels continue to increase, the use of voluntary benefits—which help offset the employee’s deductibles and coinsurance responsibility—can be a cost-effective way to protect against the financial impact of a costly medical incident.
Voluntary benefits are becoming increasingly popular due to consumerism, workforce diversity, and increased choice coupled with leaner medical plans. Private exchanges, by their very design, help consumers realize the importance that voluntary plans can play in getting a comprehensive benefits program that is best suited to their needs. And that’s a good thing.
Guest blogger Jon Trevisan is Senior Vice President, Director of Placement for Willis’ Human Capital Practice, where he provides consulting services around financial analysis and funding arrangements, benefit plan design approaches, and group marketing strategies to large national employer clients. He is also a contributor to Employee Benefit News, Employee Benefit Advisor and Benefits Selling Magazine.