NEW YORK--(BUSINESS WIRE)--
As employers consider their health care and total rewards strategies in light of health care reform, nearly half expect voluntary benefits and services (VBS) to become more important over the next five years, according to a survey by global professional services company Towers Watson (NYSE, NASDAQ: TW). These supplements to core benefits are designed to fill gaps in employees’ security, health, wealth accumulation and address unique personal needs. The survey also found that the importance of VBS in companies’ total rewards strategy will grow by 27% in the next five years.
According to the Towers Watson 2013 Voluntary Benefits and Services Survey of 320 large employers, the percentage of employers that expect VBS to be very important to their total rewards strategy will more than double over the next five years, jumping to 48% in 2018 from the current 21%. The primary reasons companies adopt these voluntary options are to provide personalized benefits that fit employees’ needs and lifestyles (83%), and to enrich their total rewards packages (74%).
The most prevalent voluntary benefit offerings currently provided by employers include life (94%), vision (84%), disability (80%), dental (80%) and accident (68%) insurance. Additionally, employers are considering adding a number of voluntary benefits over the next two years. The top offerings being considered include critical illness, identity theft and financial counseling.
Top VBS being considered for 2015
|% currently offer||% considering|
|offering by 2015|
“As organizations consider new benefit strategies in the post-health-care-reform environment, they are seeking a delicate balance between providing their employees with a competitive rewards package and not inflating costs,” said Mark Bilderback, senior health care consultant at Towers Watson. “Employers have to consider the excise tax and rein in costs before the 2018 effective date. VBS can be attractive to employers seeking an affordable way to reduce employee out-of-pocket costs while providing clear value to their employees. We expect more employers to turn their attention to these benefits in the next few years.”
Also, the voluntary benefit model delivers advantages for employees, such as choice, convenience and affordability. Employees can select from an array of options to personalize their benefit package to fit their lifestyles. Selecting voluntary products at open enrollment or throughout the year, if appropriate, and funding them through payroll deduction simplifies the process. And in many cases, employees will have a price and underwriting advantage when purchasing products at the group plan rate.
In designing plans that fit the needs of employees, employers focus on employee demographics (54%), as well as how products fit within their total rewards (50%) and wellness strategies (44%). In terms of employee demographic segments, employers feel their current voluntary benefit offerings best meet the needs of baby boomers (i.e., those born between 1946 and 1964), but least meet the needs of Generation Y (i.e., those born between 1981 and 1999).
“Personalization is a key factor in plan design for voluntary benefits and services,” said Beth Grellner, group health and benefit practice leader at Towers Watson. “In contrast to older generations, Generation Y employees are interested in benefit plans that are customized to their needs. Companies that are reliant on these younger employees can evaluate new voluntary benefit and service models to fit these needs.”
Employers can expect to see vendors launch new VBS to match consumer preferences, and for a number of private exchanges to offer these supplemental services as well. In fact, one-third of employers (34%) already expect voluntary benefit offerings to factor into their exchange decisions.
“As a new employee benefit landscape continues to emerge, more employers will evaluate the perceived and real value of adding new voluntary benefits. And a central part of this assessment will include whether each benefit aligns with the total rewards strategy and makes sense for the specific workforce,” concludes Grellner.
About the Survey
The Towers Watson 2013 Voluntary Benefits and Services Survey was conducted online between March and April to determine how U.S. employers use and deliver VBS programs. More than 320 employee benefit professionals from midsize to large companies across a variety of industries participated in the survey.
About Towers Watson
Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. The company offers solutions in the areas of benefits, talent management, rewards, and risk and capital management. Towers Watson has 14,000 associates around the world and is located on the web at towerswatson.com.
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