Sales of voluntary dental and vision plans are growing, and insurers are finding that these work-site offerings are providing more than just straight profits--they are opening the door to sales of other insurance products.
The rising cost of health care and rising workers' compensation rates are putting pressure on employers, many of whom are finding solace in employee-paid insurance products as cost-cutting measures to reduce company expenses. And while sales of many basic insurance coverages remain static, the demand for voluntary coverages is expected to increase even more in the coming years.
Dental Leads the Pack
Dental plans are one of the most highly demanded employee voluntary offerings. According to a study by Eastbridge Consulting Group, a marketing counsel to the financial-services industry, 43.8% of all employees surveyed have a voluntary dental product, making them the most popular, followed by term life (42.0%), short-term disability (33.5%), long-term disability (29.8%), vision (24.7%) and whole life or universal life (22.9%).
Rise of Voluntary Benefits
At rising medical costs force a greater number of employers to reexamine their employee-benefit packages, many continue to eliminate several or most of their offerings, including dental and vision plans.
Therefore, many employers are turning to voluntary products as a way to continue offering employees richer benefit plans without having to commit a lot of company dollars.
During the past several years, insurers say that sales of voluntary products have grown significantly. According to a recent study by Cigna Group Insurance, more than 80% of employees find value in purchasing insurance and believe payroll deduction is a convenient way of acquiring these benefits. Employers are often skeptical about their employees' acceptance of these payroll-deducted plans, but the Cigna study found that employees are more likely to appreciate the availability of voluntary products than many employers realize.
While a large number of employers have either entered the voluntary market or have examined the possibility of offering these employee-paid plans, these products have had the greatest impact on smaller companies. About 30% of employers with fewer than 100 employees don't offer any type of dental coverage, said Warren Steele, senior vice president and assistant director of marketing for Aflac Inc., based in Columbus, Ga. In addition, many of these smaller companies lack the financial resources needed to offer rich employee-benefit packages. "As a result, many of these small-sized company employers are turning to employee-paid benefit programs as a way of giving their staff benefits while saving the company dollars," Steele said.
Employers also are looking to voluntary offerings as a way of attracting and retaining employees by providing them with more choices, control and flexibility Employers are finding that voluntary benefits are strong recruitment and retention tools, said Kate Renwick-Espinosa, director of strategic marketing with Sacramento, Calif.-based VSP, a provider of vision benefits. "By recommending vision as part of an employers' benefit package, agents are likely to gain considerable credibility in the eyes of their clients, because [this coverage] is low-cost, popular and gives employers an edge in recruiting and retaining good people." Ultimately, that opens the door to widen the agent's book of business with that client in other areas of the organization or by offering other products to their employees, she said.
"Two years ago, we saw limited benefit in voluntary dental programs. Today, however, there is a tremendous opportunity to increase market share as a result of these plans," said Nate Kleinberg, senior vice president of marketing for United Concordia, a subsidiary of Highmark Inc.
Many insurers agree. Philadelphia-based Reliance Standard Life Insurance Co., which has been selling voluntary dental products since 1997, has found tremendous growth in the work-site market, a sector that accounts for 12% of its dental sales block. When Reliance writes voluntary dental coverage, one in four of those purchases includes the sale of another line of voluntary benefits.
Voluntary dental products have opened the doors for additional sales, and brokers believe that once they gain an "in" with an employer or potential client through the sale of a dental program, they then can market other employee-paid products, such as life, disability, cancer and accident and dismemberment insurance. "Typically, with something as popular as dental or as inexpensive as vision, there will be an interest among employers, and the success stories they hear from employees will make them believe that other products will make sense, because employees are showing a willingness to spend some of their money on these benefit plans," said Randy Barrett, vice president of marketing for Green Bay, Wis.-based insurer Warren Group Inc.
In addition, employers' and employees' wider acceptance of voluntary benefits is boosting the popularity of these offerings. Employers are more familiar with voluntary plans than ever before, so they now are more open to the idea of employee-paid products and are willing to learn more about additional types of plans, said Rob Heller, president of Alpha Benefits Group in Warrington, Pa.
"Brokers already have employers as customers, and there is the potential they are leaving some revenue on the table if they aren't going in and assessing that employer's needs and trying to fill gaps with voluntary products," said Donna Mountain, second vice president of work-site marketing for Fortis. As a result, Fords is conducting educational campaigns for their distribution channels about why voluntary products are important to gain additional business with existing clients and maintain that business and strengthen client relationships.
Other insurers are skeptical about the potential for additional sales. "I'm not certain that offering one voluntary product helps with the sale of additional products; however, I think there are different levels of consciousness toward insurance in general," said Gene Hallmark, president of Hallmark Insurance Services in Florida. The key to marketing a supplemental plan to employers involves impressing upon them not to prejudge a product that they may or may not have an interest in. Employers are in essence making the choice for employees before the employees have the chance to decide for themselves. "Supplemental voluntary plans provide benefit to both the employer and the employee, and the minimal costs to employers for payroll deduction and administrative expenses are negligible. In return, the employers may see less turnover due to their benefit package, and employees that have coverage to meet their needs have less down time and are more productive," he said.
Other low-cost supplement programs, such as life, dental, prepaid legal, cancer and accident plans, also strengthen the employer-employee relationship. This, in turn, may drive employers to add more voluntary offerings to their employee-paid benefits menu, Hallmark said.
In addition to the rise in sales of voluntary dental and vision products, insurers should pay attention to other trends that may help market work-site offerings.
* Geography Insurers have noticed a geographical trend in the marketing of work-site products. According to recent insurer sales statistics, the southern portion of the United States has experienced the greatest increase in voluntary dental and vision benefit product sales. "Employers in that area often tend to not offer robust, fully employer-paid plans, thus creating a greater demand for these products as a result," said Julie Sherrets, vice president of marketing of Greensboro, N.C.-based Jefferson Pilot Financial, which last year reported 42% of the company's sales of voluntary dental products were from the southeastern United States.
Some of the southern states and regions that have had the greatest demand for employee-paid dental and vision products include Florida, Georgia, New Mexico, North Carolina, southern California and Texas.
* Product Design. As many insurers over the years tried to get into the voluntary arena by revising or repricing true group products for low participation, they met difficult and unsuccessful challenges. "Insurers have to control the expenses associated with costly major services through a series of deferral periods or incentive programs," said Fortis' Mountain. As a result, the product design of voluntary products differs from true group designs through the inclusion of such things as waiting periods and incentives.
But the biggest change in the voluntary sector wasn't a result of the transition of product design but rather of the growing emphasis on education, communication and employee enrollment of work-site products, Mountain said. "For years, there has been an explosion of electronic tools and paper communication to educate consumers, and I think the revolution in voluntary has been by carriers becoming more sophisticated in trying to make employee sales."
When examining the voluntary product design, the bottom line points to one thing--finding the right mix of cost containment so there's value in the plans, said Bruce Cacciapaglia Jr., vice president of marketing and product development for PacifiCare Dental. "If you throw too much cost containment in, then it's worthless, and too little may be too much risk for an insurer to bear."
* New Advances. The recent advances and development of new technologies in the dental and vision arenas have added to the growing attraction for employee-paid benefits. The proliferation of laser vision correction, the demand for more corrective lenses and various eyewear products and the need for orthodontic treatments and cosmetic applications to brighten and whiten teeth are just some of the added benefits individuals are seeking from their dental and vision benefit plans. Insurers are confident that as new technologies continue to hit the industry, voluntary dental and vision plan sales will spark continued growth.
Over the past five years, voluntary dental and vision products have found their place in the market, and insurers are confident they will see increased sales in the coming years.
"If done right, voluntary dental and vision can be a profitable line of products for insurers, and more importantly, it is a great door opener to sell other lines of coverage that can then be packaged together," said Heller of Alpha Benefits Group.
Heller and other insurers anticipate the demand for more work-site products will continue to flood the market. The increased demand for preventative dental exams and maintenance procedures and the growing need for more prescription eyewear from the aging of the baby-boomer generation will likely contribute to this.
The Internet's Role in Work-Site Marketing
While the Internet is beginning to find its niche in the voluntary benefits market, insurers have various views about its impact.
Most insurers agree that the Internet's key benefit in the work-site marketing arena is the amount of product information it provides to users. Not only are individuals able to ask questions, check the status of a claim and enroll online, they also can get more information than ever before from the Internet. As a result, both employers and employees are becoming more educated about the benefits voluntary dental and vision plans offer, thus increasing the sales of these products and opening the doors for marketing additional work-site offerings.
"Internet technology has allowed us to achieve real gains in our ability to give members the information they want and need--when they want it and when they need it," said Kate Renwick-Espinosa, director of strategic marketing for Sacramento, Calif.-based VSP, a national provider of vision benefits. Through its Web site, www.vsp.com, members can access personalized vision benefit summaries, find doctors, learn about eye health and eyewear needs and set up an appointment with an eye-care specialist. In addition, technology has assisted doctors with Eyefinity; a VSP subsidiary; with faster payment processing and reduction of claims errors for the more than 14.5 million electronic transmissions it processes annually.
Davis Vision, a subsidiary of Highmark Inc., also has found tremendous success in voluntary product sales with the use of the Internet as an enrollment tool. Five to six years ago, when the company first noticed a growing interest in the work-site arena, Davis Vision had about a 10% participation rate in voluntary programs. Today, the Web has contributed significantly to the company's 35% to 40% participation rate, said Joe Carlomusto, executive vice president and chief marketing officer.
Not all insurers, however, have found similar success. Those marketing voluntary offerings to some blue-collar employee groups have found only minimal benefit from the Internet. Some of these groups do not use the Internet very much, so they are relying more on the traditional information-gathering approach of human resource departments and company representatives to get information about voluntary products.
"I think the ability to do Web enrollments is grossly overstated right now, because nothing can replace a person standing in front of a group of employees with face-to-face communication," said Phil Cohen, president of Broad Reach Benefits in Madison, N.J. His company, however, does rely on technology to assist in back-end operations and as a tool used in conjunction with other methodologies. "It's just not the end-all yet," Cohen said.
The Value of Voluntary Dental and Vision Products
Voluntary dental products are quickly becoming a sure sale for insurers. According to East-bridge Consulting Group, more than 31% of employees it surveyed expressed an interest in purchasing a contributory dental plan if the coverage were offered by their employers. And while vision coverage has not yet reached the high demand that dental has achieved, voluntary vision products are a growing line of business for carriers and brokers.
As medical costs continue to increase and employer discretionary dollars diminish, more employers are turning to voluntary products. And judging from the rise in popularity of both dental and vision coverages, employees are willing to contribute a few dollars a month in out-of-pocket expenses to receive these coverages.
"You don't have to sell dental insurance--you just have to show it," said Gene Hallmark, president of Hallmark Insurance Services in Florida, who has found success in the sales of work-site dental plans, particularly through his new Web site, www.MyDentalOnLine.com.
"Many carriers missed the boat when they first looked into voluntary dental nearly eight years ago," said Phil Cohen, president of Broad Reach Benefits in Madison, NJ. Insurers were skeptical that there was money to be made in the market. In addition, they believed that adverse selection was too great and rates would be too high. The market, however, has taken the opposite turn.
Broad Reach Benefits continues to find success in the marketplace. While typical voluntary dental plan enrollment averages between 30% and 40%, the company is enrolling about 60% of eligible employees into its work-site dental programs.
Preferred provider organizations and indemnity plans are growing among products in the voluntary dental arena. According to a summary of Limra International's 2001 year-to-date sales, nearly 10,000 employer groups with more than 901,000 subscribers were involved in a dental indemnity plan, while more than 16,000 employers with more than 1.9 million employees had some type of PPO plan coverage.
Many insurers are confident that PPO plans will experience continued success in the coming years. As the trend in true group, or employer-sponsored, plans has shifted to dental PPOs, the need for choice and flexibility offered through PPOs is beginning to be seen in the voluntary market, said Bruce Cacciapaglia Jr., vice president of marketing and product development for PacifiCare Dental.
Because many health plans and managed-care programs offer some form of vision coverage as part of their health-care benefit packages, there has generally been less demand for vision benefits than for the traditional stand-alone dental product. But insurers are recognizing a growing need for vision coverages as baby boomers age and employers cut back on medical insurance offerings, and they are beginning to offer these products to complement their existing work-site offerings.
Today, two out of three Americans use corrective lenses, leading to the growing employee demand for some type of vision coverage. According to a recent survey by Managed Vision Care, 69% of employees would be willing to trade a vacation day for annual eye exams and eyeglasses, and 60% would trade two vacation days, said Kate Renwick-Espinosa, director of strategic marketing with Sacramento, Calif.-based VSP, a provider of vision benefits.
While only 30% of all companies offered vision coverage five to six years ago, nearly 70% of companies now sponsor some level of vision-care benefit. "There's been a snowballing effect, where companies feel that they now need to include vision coverage in their menu of benefits in order to be competitive," said Joe Carlomusto, executive vice president and chief marketing officer for Davis Vision, a subsidiary of Highmark Inc. As a result, insurers anticipate that work-site vision product sales will increase.
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|Title Annotation:||sale of voluntary dental and vision plans|
|Comment:||Opening Doors.(sale of voluntary dental and vision plans )|
|Article Type:||Brief Article|
|Date:||Nov 1, 2001|
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|Consider voluntary benefit options: for many employers, they're a way to ease the pain of cutbacks in health-care coverage.|