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Why Offering Supplemental Insurance is a Smart Strategy for Small Business

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Voluntary plans offer employees value, protection, and greater satisfaction with benefit programs.

With benefit plans capturing an increasing share of most small business’s budget, supplemental insurance offerings can be part of an effective strategy to provide protection and value for their employees at an affordable cost.

Voluntary plans can also help small businesses in attracting and retaining top talent in today’s increasingly competitive market, according to Jay Starkman, CEO of Engage PEO, a south Florida-based firm providing outsourced human resources services.

“If an industry has as its norm employers providing supplemental insurance,” said Starkman, “And your small business is part of that industry and aren’t providing supplemental insurance as part of your offering, than you’re behind as an attractive place to keep or attract new employees. If you’re in an industry that doesn’t provide these relatively inexpensive plans, by providing them you can be an employer of choice within your industry.”

Starkman noted the most popular supplemental plans he sees offered are traditional insurances of short and long term disability, life insurance, vision, and dental. Additionally he cited employee level voluntary products such as cancer (or critical illness) insurance, accident insurance, and even pet insurance increasingly being offered.

While the cost sharing of these plans varies by industry, Starkman shared he felt it always benefits employers to offer these plans.

“To not offer these plans at an employee paid level is a mistake for any company,” said Starkman. “Why wouldn’t you offer the ability for employees to have access to these insurance plans if they want and need these at no expense to the employer on a payroll deduct basis?”

Starkman’s experience indicates supplemental plans most frequently paid for by employers are life, vision, and dental, with a smaller number providing STD and LTD.

Increased focus on financial wellness

For Rob Shestack, executive vice president and benefits practice leader with AmWINS Group Inc., a leader in the wholesale insurance industry, employee need and demand for supplemental insurance is a critical reason employers should offer them.

“Regardless of employer size, and where employees purchase their medical insurance and who pays, the need for supplemental programs such as life insurance, disability insurance, accident, and critical illness insurance doesn’t change,” said Shestack.

“These programs are meant to protect individual assets. Life insurance is meant to protect their estate, to cover mortgages, loans or college funds. Disability insurance is meant to protect the paycheck. Accident insurance protects deductibles and coinsurance. Critical illness insurance is more of financial protection benefit.

The need to address gaps in traditional coverage exists more today than ever. Employees are turning to their employers to help identify and make available plans to address this. And more employers want to address financial wellness and provide these plans for their employees to address these needs.”

Counterbalance to rising medical premiums

Shestack noted providing employer paid supplemental insurance such as accident and critical illness to employees on an after tax basis can be an effective strategy for small business looking to provide counterbalance to double digit annual increases in medical premiums.

“It’s not uncommon today for employers to see a 25 percent medical premium increase or more,” said Shestack. “To help keep increases in check, more plans are skewing towards higher deductibles, higher co-pays, and higher out of pocket expenses. An employer may choose to offer supplemental accident and critical illness plans that can address those gaps and provide a financial cushion.”

Greg Mullikin, regional sales director at MassMutual Financial agreed that supplemental plans can serve to address increasing health care costs.

“Both accident and critical illness plans are designed to offset the rising costs of medical plans offered by employers,” said Mullikin, who noted demand for a variety of supplemental plans is rising.

“MassMutual anticipated the surge in voluntary benefits and recently launched group Whole Life nationwide earlier this year. This is primarily a voluntary based product offering but can also be blended and sold as both employer and/or employee paid.”

Mullikin cited group universal life, accident, and critical illness are some of the most attractive voluntary product lines of business industry wide.

“All of these products add value to the employer and its employees,” said Mullikin. “These voluntary benefits produce financial stability and peace of mind for employees and the ability to attract and retain key talent for employers in the workplace.”

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