The Hidden Value of Social Security Disability Insurance: Why It’s Important During Benefits Enrollment
How Supplemental Benefits Work and How Employers Can Maximize Them
Carol Harnett [00:04.40]: Hi everyone, this is Carol Harnett. I am the president for the Council for Disability Awareness. The name of our show is the Financial Health and Income Network.
The Council for Disability Awareness is doing a campaign to help employers plan for annual enrollment for employees in 2019. The purpose is to give them material to consider, and help direct, motivate and shape their planning this year. Today’s topic is one that’s become particularly important over the last decade or more. The topic is something that’s called supplemental benefits.
Listen to the full podcast here, or if you’d rather read than listen, we captured the transcript from the conversation below.
I’m really pleased today to introduce our guest, Phil Bruen. He is the vice president for group life and disability products at MetLife. MetLife is a founding sponsor of the Council for Disability Awareness. We are so pleased and thankful for their support and particularly pleased to have Phil here today. Welcome Phil.
Phil Bruen [01:05.36]: Hello Carol. Hello everyone. I’m glad to be here.
Carol Harnett [01:09.85]: Great! Well, without wasting any time, let’s get into this topic of supplemental benefits. Let’s just start with something really basic for people who might not be clear. What are supplemental benefits?
Phil Bruen [01:25]: Thanks, Carol. Actually, as I think about it, we do hear the term supplemental benefits everywhere. I’d like to introduce the concept of thinking of these as complementary benefits to a core benefit program. When we think about supplemental, it’s something on top of, or an additive to supplement the benefits an individual has. A better way to think about it instead is that they’re highly complementary to a core benefit plan.
We also think about these in three categories which could include core benefits. One would be those benefits that help individuals in a broad sense around health. The second would be those benefits that help an individual with life that could be life insurance. Health protection, life protection and financial protection.
Within those categories, there are different types of benefits that can be offered.
When you think about financial protection and a voluntary benefit that’s very popular would be legal services. That could help individuals with estate planning and wills, or something like a speeding ticket. It’s as simple as that. Accesss to a high-quality network of attorneys, nationally certified. It’s become a very popular benefit. Worksite property and casualty is another one that you could consider as financial protection.
Certainly, a healthcare plan is foundational. I’d suggest that disability is another foundational benefit because it protects an individual’s income. It is an employer-paid benefit and dental usually falls in that core benefit category. But it can be offered on a voluntary basis.
The way I think about it, first as a suite of benefits to offer an employer to help meet their needs that are complementary to an employer-paid program or a benefit plan. That’s how I would suggest we think about supplemental benefits in general.
Carol Harnett [03:56.88]: I like that Phil.. You’re the first time I’ve heard that called it complementary. It doesn’t mean others haven’t it’s just the first time I’ve heard it. If I’m connecting this correctly, supplemental benefits are interchanged with voluntary benefits, and I like this idea of a suite of benefits that complement the core. I think that’s really important. Since you’ve sort of foreshadowed this idea of core benefits and complementary benefits, why should an employer consider adding them to their employee benefits package?
Phil Bruen [04:39.89]: Great question. I think the first and foremost reason is really what’s happening with an employer’s health care plan.
If I think of that category of health protection. The health care plan is foundational, but with rise of employer-offered medical with high deductible, employees or dependents, could be left with significant out-of-pocket costs they simply can’t afford. As an example, in last year’s MetLife Employee Benefit Trend Study, more than half of U.S. workers live paycheck-to-paycheck. The Federal Reserve reported that 40% of Americans could not afford an unexpected $400 cost. If we have a medical episode, and that bill is likely more than $400, having a benefit like critical illness, accident or hospital indemnity, can help fill those gaps in for those unexpected moments that tie really to health and health protection.
Carol Harnett [05:52.94]: Thank you. I think that’s a great example. If you don’t mind, I’ll ask you to continue on that. This is some of the more popular complementary benefits that I’ve heard spoken of, particularly leading with the critical illness benefit. Can you help people understand what those products are actually designed to do and what they cover.?
Phil Bruen [06:20.98]: Absolutely. What’s great about these benefits is that they tend to fit four different employee populations. If you think of someone who has a lot of children, or are in a younger population, versus someone who might be a little bit more mature in the organization, they may have different needs. They also may have different budgets related to the health care plan and what might be unexpected. We found that accident, critical illness and hospital indemnity have some of the lowest understanding scores. In our Employee Benefit Trend Study, just a little over a third of employees said they understood how accident insurance works. Only over a quarter, 29%, said they understood how critical illness insurance works. For hospital indemnity only 26% understand how hospital indemnity insurance program works. It’s not just offering the benefits, but educating employees on where these might work, how they might fit, and how they complement their health care plan. This is compared to dental where two thirds of employees say they understand how their dental insurance works, and vision where 62% say they understand how it works. It is understandable.
I’ll spend a little bit of time to describe some of these. Critical illness – the benefit is fairly descriptive. That’s a benefit that would be paid in a lump sum. Depending if the employee covers both themselves or their spouse, a benefit would be paid in a lump sum for serious, or full benefit, like cancer.
There are different definitions of cancer as that’s a fairly common condition. Partial benefits for cancer would be a partial payment, not a full payment, for more limited cancer condition, coronary bypass graft, or major organ failure. These are examples of the categories that would be payable in a lump sum. It is intended for something that is very severe. Eighty-seven perecent of claim activity are in those listed conditions that I just outlined. The average benefit payment is $15,000.
What would be more of a severe condition? An individual with cancer, or someone with a major artery condition, like an organ failure, is going to have a lot of costs that aren’t covered under the plan. They may also have transportation costs, and other related costs. That is what that benefit is really structured and designed to do – help individuals in terms of a complementary protection.
Carol Harnett [09:24.23]: I sometimes speculate that part of the reason why employees get confused about critical illness, because I agree with you, I believe it’s an appropriately named benefit particularly the way you’ve just described it. I recall that when Walgreens went to a high-deductible health plan for benefit-eligible employees, they went to a five thousand dollar deductible. They phrased this to mitigate the five thousand dollar deductible, so they paid for a five thousand dollar critical illness benefit. As a result, it appeared that their employees thought that benefit was meant to offset the deductible. What you’re saying is that’s only true if it meets one of these critical situations.
Phil Bruen [10:15.28]: That’s correct. Another way I think about this too is we have these conversations you can even tie it to disability. If you think about a disability benefit certainly that’s a baseline level of protection or a layer of protection. You can see it as something that might complement a disability policy because if anyone is impacted by these conditions as I’ve described, there’s over 30 conditions that are covered. I just highlighted the top conditions.
It essentially is intended to cover those severe conditions where the individual would have additional expenses associated with those conditions, where their disability protection isn’t enough. It’s probably a consolation, or a combination of both additional costs related to that condition. There is impact where individuals would have higher deductibles and co-pays and maximum out-of-pocket benefits where these conditions will likely trigger that maximum. That’s a way to think about that and a common way to position it is with this concept of short-term disability. Then it’s an additional benefit in those situations where a short-term disability event is more severe.
Carol Harnett [11:42.88]: Thank you. I think that’s really helpful. And I interrupted you I know you were going to I think about accident next.
Phil Bruen [11:50.72]: Accident has a very different premium structure. It’s usually more affordable, but it does help fill the gap for those unexpected events that might happen. I can give you some examples of this in terms of where this comes up. It’s would apply to emergency room visits or medical testing, and follow-up for physician, for certain fractures, medical appliances, therapy services outpatient surgery, lacerations, ambulance, and some other critical urgent care events. About 57% of the accident claims are covered with that list of examples with average benefit payout of 1,700. That’s an example where it can help fill the gap. It’s an affordable level of coverage typically how it’s outlined. It’s a scheduled payment that can address part of a copay or an out-of-pocket deductible, to help supplement that in these circumstances.
As you can imagine folks who have children, or who have kids playing in sports, where they may have torn cartilage, laceration or eye injury or something of that nature. They can see and understand where this might be the kind of protection that could help them. That’s the accident benefit.
Again, in the same way, you get a sense of hospital indemnity. It pays a benefit, usually around hospitalization, both for sickness, for admission or confinement, or accident confinement or an ICU confinement benefit. It’s a bit more of a severe condition typically, so it’s a broad coverage.
The condition is really around hospital confinement of some form. That’s a situation where deductibles are going to be higher in terms of the actual co-pays and out-of-pocket expense. It’s a way to help cover some of that cost. Eighty percent of the benefits are usually paid for those three confinement scenarios, and the average benefit payment is $1,500. The price point there would be a little bit different, not quite as much as critical Illness. It’s a good example where individuals look at their own personal circumstances. They look at their budget for their own family situation, and find one of these that may work better for them than another.
I have just a little bit on dental. I highlight this because sometimes dental is more often a core benefit. Dental is quite often fairly heavily employee-paid, either by the share of premium that the employee pays, or the co-pays. We are seeing some movement towards a greater increase in the offering of a voluntary dental plan.
The reality is that dental plan designs have remained unchanged for a long time. They can be outdated. I think it’s helpful to lift the hood to make sure the plan design elements meet employee needs. We would offer a plan design review to make sure that these benefits as they’re described provide the most value and are modernized to meet current oral health care needs. When there’s a voluntary plan, it’s helpful in offering a dental plan to offer two options. One is a richer plan, and one that may be a lower price point for individuals who have less oral health care needs and may want a less costly plan that they can afford.
It’s going to be fairly logical and important that it’s communicated along with the enrollment strategies. This is to help employees understand the value of a dental plan. Receiving regular dental care is important not only to oral health, but its impact on overall health and well-being.
Carol Harnett [16:37.18]: Well said, and I’m glad to hear that you will review plan design with employers when they’re looking at dental, because I have seen in another part of my life where I write about employee benefits that some employers still have a plan design that reflects the origin of dental insurance, which is the 1960s and have caps of a thousand dollars, which certainly didn’t don’t scale as well to 2019. So I think that’s really important.
Phil Bruen [17:12.89]: With dental, It’s really all all about those details. There’s no question.
Carol Harnett [17:15.93]: Absolutely. It’s funny Walgreens has been very public in some ways about their utilization. They found with dental, and I’m curious about whether you see this, that while it’s a very popular benefit, in a two-year period, 70% of their employees never used the dental benefit. Are you seeing similar trends or do you see higher utilization than that?
Phil Bruen [17:44.59]: Actually we do see higher utilization. The more individuals use their dental plan, the more it helps demonstrate the value of the benefit itself, from an employer perspective. It’s an area we look closely at. When we plan into the future we help support the regular habit of going to the dentist – preventive care. Most plans pay all, or virtually all, the costs for preventive dental treatment. Doing that can avoid other costs over time, that not only impacts oral health, but overall physical health and well-being.
Carol Harnett [18:41.23]: I remember the early research that came out with the connection between heart disease and dental disease. I think that’s something people often miss. I’m looking at the clock and we have just a little more than 11 minutes left. Is there another benefit you’d like to highlight for us, or would you like to move on to discussing another element?
Phil Bruen [19:06.77]: I think that was good to just get a sense of those coverages. Feel free to fire away if you would.
Carol Harnett [19:17.65]: This has been great. I am sure for employers who are listening, it both can be overwhelming, but also confirming the way you are explaining it. It helps people start to figure out how do you lay out lack a blueprint for what you might want to do with benefits. Since supplemental benefits, or complementary benefits, are often employee-paid fully, and sometimes partially, how can an employer help their employees, their staff, learn more about these complementary and supplemental benefits and consider enrolling in them?
Phil Bruen [19:58.83]: There’s quite a bit. I think that’s a great question.The first aspect of that is it’s never too soon to start planning for the enrollment season – the annual open enrollment season. Thinking about what an employer wants to accomplish in that annual enrollment season, and thinking about that on a multi-year strategy, as something over time. What are the goals to accomplish?
I think that’s where it all starts. We learned this from the employee benefit trend study – employees are confused and they are stressed by the enrollment process. Only half are confident that they made the right decisions. Nearly half are stressed with the process, and over a third say they’re confused. To the degree that an employer can work with their broker partners, and others, to help map out a comprehensive enrollment and communication strategy, I think that’s where it starts. It potentially starts with an assessment or a survey. That is a good place to start. Determine gaps, in terms of understanding benefits that are available, and build a communication strategy that’s multi-pronged with multiple touch points. Employee demographics, their desires, dreams, and location can come into play.
A good place to start is the term, a “heat map,” or mapping a way to look at where those gaps would be, and then building a plan to close those gaps. From there, step back. Then go back to that broader comprehensive benefit strategy, key messages that are the objective to convey there. Because those messages can be very complementary to these complementary benefits.
If the employer is changing their health care plan, they can complement that with some additional communication about the availability of critical illness, accident, hospital indemnity. It’s a very natural communication at that point in time. Put in the context of what else is happening, there are communication firms that are very skilled at helping tie those programs together. It may be that they’re also introducing a wellness program, very closely associated with some of these complementary benefits.
We’re hearing a lot about financial wellness, and financial wellness plans. Depending on how the employer is approaching that, we hear about student loan debt, and other needs that employees have, very specific to employers. If there are solutions that can help address some of that, they can also be a complementary product or benefit message tied to something like legal solutions, financial wellness solutions, as well as, auto and home purchase at the worksite.
Thinking about financial wellness in that context can help as well. I think about the planning process and reflecting the fact that employees aren’t that confident. Anything the employer can do to help give them greater confidence through effective multipoint communication strategies is going to help employees see the value in their overall benefit package as they approach annual enrollment season. Right now is actually a good time to start.
Carol Harnett [24:06.26]: Yes, absolutely. That’s a great summary because I know some people are for, and some people are against, selling products like home and auto in the workplace. If you think about it, as human beings, we think about our life as a whole. We don’t think about benefits necessarily that we get at work, and benefits that we get at home. If we can tie it all together, it can ease somebody when they’re making an overall strategy for how to protect their lives and insure their lives.
I like how you explained that, and I have a question. I know some employers who will pay part of the premium for complimentary benefit. Is that common or is it more common for the employee to pay all of the premium?
Phil Bruen [25:502.38]: I’d say for most of these benefits it’s more common that the employee would pay for most of that benefit, but there can be times, your Walgreens example is one, it’s usually tied to some change in the healthcare plan, or some change of that nature. Although there may have been some employers with the recent tax cut who had considered enhancing their benefit package in some fashion, it’s you that’s probably more of the exception. It’s usually tied to some other action that the employer is taking where this can help reinforce the message that employers always want to offer a competitive benefit package.
It’s a tight labor market, right. A valued benefit package, comprehensive in nature, is an important consideration for employees, both staying at an employer and and also joining an employer. That may be part of it too. It could be tied to an employer within very tight labor market. They may consider enhancing their benefits to pay for a portion of the cost for some of these benefits as well.
Learn more about what are the most important benefits an employer can offer both current and prospective employees. See our blog with important facts about supplemental insurance benefits.
Carol Harnett [26:25.63]: Thank you. That’s great insight. So I’m going to give you the final word. We have about three minutes left. Are there any parting tips for employers that they should consider when adding supplemental or complementary benefits to their overall benefits package?
Phil Bruen [26:48.30]: Well, I think I covered quite a few of them already. It is helpful to think about it over a multi-year period, and not to approach or emphasize every benefit every year. It is helpful to focus on a theme for a particular year, or a campaign theme to highlight aspects of their benefits. I like the categories health protection, life protection, and then overall financial wellness or financial protection. There may be different themes in a particular year, and they can think about it over a multi-year benefit, It creates a better approach, strategically, around a benefit strategy – as opposed to just tactically coming at it each year in terms of what they want to do. It may be helpful to step back a little bit about what to emphasize. Use a heat map, and look at what the biggest gaps are, and what an employer wants to accomplish in that particular year.
Carol Harnett [28:05.59]: I love that. What a great way to summarize. I am looking at my own notes and I had highlighted the multi-year strategy. For all the years that I’ve talked with employers about their plans, very often it’s a singular strategy every year. The idea of creating this heat map, which is another great phrase, and deciding what you’re going to focus on each year, is not only helpful to you as an employer and developing an overall compensation benefit strategy, but I think more helpful for your employees.
Phil Bruen [28:44.65]: Don’t get me wrong, I’m not talking about 10 years. I’m suggesting you have a three-year strategy.
Carol Harnett [28:55.24]: In my head, I thought three. I think three years is a great period of time particularly the way you laid it out. I like the theme of health protection, a theme of life protection, and a final theme on financial protection.
I’m going to going to close and thank you so much Phil. It’s been great to have you on the show again. You’ve become such a great resource, for not only the Council for Disability Awareness, but also for our listening audience. So thank you so much for your time and your knowledge and your expertise. I want to say thank you as well to our listeners.
Phil Bruen [29:46.82]: Thanks Carol. Bye.
Carol Harnett [29:46.24]: We wish you the best for the rest of the day and the week, and thanks to everyone else. Good-bye.
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