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Learnings From Voluntary Benefits Participation Trends

Author

Mary Trecek
Associate Research Director, Workplace Benefits
LIMRA and LOMA

October 2024

In today’s competitive job market, many employers are trying to differentiate themselves from the competition through unique benefits and wellness offerings. In looking at the 2021-2022 Employer Benchmarking Study: Benefits Penetration Rates, Funding, and Participation, most employers on average offered seven benefits, and the most offered benefit by employers was insurance. However, according to that same study, very few employers paid the full cost for any of the benefits offered. The product with the highest percentage of employers covering 100 percent of the benefit was life insurance — at 42 percent. For all other benefits (excluding life), the majority of cost was passed to employees, as contributory or fully voluntary products.

The success of voluntary workplace benefits products relies not only on initial sales but also on employee participation rates. However, the rising costs of benefits, as well higher expenses overall, can impact employees’ ability to participate in those workplace benefits. As pointed out by LIMRA’s Pat Leary in a July 2024 MarketFacts article, “A major contributor to the cost of benefits (for both employers and employees) is the cost of health insurance. An employee’s share of rising health insurance premiums limits their ability to participate in other workplace benefits, such as retirement savings plans, wellness programs and voluntary benefits.”

Wallet Share

This concept of wallet share affecting employee participation in their benefits program was discussed as part of the 2024 BEAT Study: Benefits and Employee Attitude Tracker, conducted by LIMRA annually. Associate Research Director Kim Landry noted in the 2022 report, “Employees are willing to spend a median of $150 out of their monthly household budgets on benefits, excluding retirement savings. Three-quarters of employees say they would spend $300 or less per month, while one-quarter of employees would be willing to spend $65 or less.” In the 2024 report, that monthly median spend for consumers dropped to $120 (again excluding retirement savings), down $30 a month.

While increasing inflation and decreasing wallet share may not fully be responsible for the change, there has been a decrease of 2 percent in new worksite/voluntary premium from this time last year, based on the first-quarter 2024 data from the U.S. Worksite/Voluntary Sales and In Force results.

2024 Survey

With this in mind, LIMRA conducted a brief survey, Workplace Benefits Participation: Carrier Practices, in July 2024 (soon to be published) that reviewed the types of voluntary products offered and participation rates for those products. Twenty carriers participated in the study, which considered voluntary products filed on a group and individual basis. This study also asked carriers to discuss new sales and in-force (or reenrollment) participation rates, comparing their own organization’s results from 2023 to 2022.

When comparing participation rates between those years, over half of the responding carriers felt that things stayed the same (Figure 1). However, close to 40 percent of the respondents saw participation rates increase from 2022 to 2023. Only one carrier saw a decrease, which offers a sense of optimism, given the pressures on employee benefits spending in the face of inflation.

Figure 1. Carrier Observation of Voluntary Benefits Participation Trends From 2022-2023


Filter the data in this chart by clicking on a color bar in the chart legend.


Of the participating companies, almost all offer critical illness, accident and hospital indemnity as voluntary products. Short-term disability and term life were the next most prominent products across respondents.

Looking further at the participation rates of the most commonly offered products, critical illness is offered by 95 percent of the respondents, but has participation rates of less than 25 percent in new sales. In contrast, accident insurance has slightly higher participation rates for new sales, topping at 30 percent, and term life shows participation rates up to 40 percent.

Participation rates remain the same when looking at reenrollment for these products — although fewer carriers report participation at the top end of the range. Short-term disability, vision and dental have the highest participation in reenrollment percentages, with some carriers reporting 46 percent or higher. With that said, only 6 of the 20 carriers reported these high participation rates for reenrollment.

The survey also covered factors that were considered to have influenced enrollment rates. Of the various options offered, over half of the carriers required employees to make an active enrollment decision, i.e., their prior year’s selections did not automatically carry over. Using the same enrollment platform for all benefits options was seen as extremely influential on positive enrollment results. In fact, using the same enrollment platform for all benefits options was highly rated by nearly all respondents, with 95 percent rating the option “very influential” to “extremely influential.”

Conclusion

While carriers are reporting that more benefits funding will come from voluntary products in the future (as described in the findings from the upcoming 2024 Distribution Trends study, first mentioned in the September edition of MarketFacts), it is important to note that reporting the actual participation rates offers challenges for many companies. Respondents to the LIMRA study indicated that synthesizing enrollment information is difficult, given issues with manual calculations, difficulty in adding employer size and industry type to the reported numbers, or that enrollment data of this type is not something they capture for reporting.

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