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The Shift To Voluntary Coverage

By: Jeff Kolesar, Vice President, Sales and Market Development

Part of the new normal of insurance is a drastic shift to voluntary coverage. The Affordable Care Act, and all the changes surrounding it, is one big reason we’re seeing the boom in voluntary insurance coverage. A second reason is the growth of employee wellness programs. More and more businesses are using them as a means to offset healthcare costs. The simple fact is employers know they need to offer dental and vision, and it’s easier for them to make it voluntary.

Several years ago, many groups didn’t even offer dental. Today, it’s safe to say about 90 percent of groups do. In the “old days” of insurance, Renaissance considered a plan to be voluntary if the employer contributed as little as about 20 percent. Times have changed, and now we consider voluntary coverage to be plans with as much as a 50 percent contribution from employers. These changes aren’t necessarily because of the ACA, but more because of the overall economic squeeze businesses have been dealing with. Very few groups today contribute 100 percent of ancillary benefits.

So why the big change to voluntary? One theory is that when the ACA added pediatric dental and vision as essential benefits, medical carriers were so consumed with all of the changes that they didn’t concern themselves with dental or vision. That opened the door for stand-alone companies like Renaissance to come in and cover ancillary. Now that the ACA has been in place for a few years, we’re seeing medical carriers start to focus on dental and vision to an extent. But, in many medical plans that include dental and vision, you need to meet your medical deductible before your ancillary coverage kicks in.

Wellness programs have grown to become a $6 billion industry because employers are convinced they help to lower insurance costs. As a result, wellness has grown in demand and created a need for employers to offer a more complex list of benefits options.

Dental insurance is designed for preventative care that often completely covers routine checkups, resulting in very little to no out of pocket costs. In the past, about a third of clients went to the dentist twice a year for cleanings, another third went once, and the final third didn’t go at all. An increase in voluntary coverage means more people are going to use their benefits since they’re the ones paying for them. We’re confident that because more people are using their benefits the overall health and wellness of our customers will improve. That will lead to fewer high cost procedures that often result in more out of pocket expense for everyone.

Dealing with the changes to voluntary means companies are being forced to change how they do business. In the past, it was more acceptable to include a waiting period or deferred services. The waiting period meant you would have to wait 12 months and be in the plan before you could get a particular benefit. That waiting period style was predominant about 10 years ago, but the shift to voluntary benefits brings added pressure to waive waiting periods. That pressure comes from clients who are now paying for plans with their own money and want to be able to use their benefits as soon as they sign up. All of these changes mean companies need to be more nimble and accepting of change, because it’s unlikely the shift to more voluntary coverage is the only change we’ll be dealing with as insurance providers look to the future.

Part of the new normal of insurance is a drastic shift to voluntary coverage. The Affordable Care Act, and all the changes surrounding it, is one big reason we’re seeing the boom in voluntary insurance coverage. A second reason is the growth of employee wellness programs. More and more businesses are using them as a means to offset healthcare costs. The simple fact is employers know they need to offer dental and vision, and it’s easier for them to make it voluntary.

Several years ago, many groups didn’t even offer dental. Today, it’s safe to say about 90 percent of groups do. In the “old days” of insurance, Renaissance considered a plan to be voluntary if the employer contributed as little as about 20 percent. Times have changed, and now we consider voluntary coverage to be plans with as much as a 50 percent contribution from employers. These changes aren’t necessarily because of the ACA, but more because of the overall economic squeeze businesses have been dealing with. Very few groups today contribute 100 percent of ancillary benefits.

So why the big change to voluntary? One theory is that when the ACA added pediatric dental and vision as essential benefits, medical carriers were so consumed with all of the changes that they didn’t concern themselves with dental or vision. That opened the door for stand-alone companies like Renaissance to come in and cover ancillary. Now that the ACA has been in place for a few years, we’re seeing medical carriers start to focus on dental and vision to an extent. But, in many medical plans that include dental and vision, you need to meet your medical deductible before your ancillary coverage kicks in.

Wellness programs have grown to become a $6 billion industry because employers are convinced they help to lower insurance costs. As a result, wellness has grown in demand and created a need for employers to offer a more complex list of benefits options.

The changes in coverage from employer-based to voluntary means rates are bound to increase. More people are going to use their benefits since they’re the ones paying for them. In the past, about a third of clients went to the dentist twice a year for cleanings, another third went once, and the final third didn’t go at all. As an insurance provider, we bank our money on the folks who don’t go to pay for the people who do go. If everybody met his or her deductible, insurance companies would cease to exist.

Dealing with the changes to voluntary means companies are being forced to change how they do business. In the past, it was more acceptable to include a waiting period or deferred services. The waiting period meant you would have to wait 12 months and be in the plan before you could get a particular benefit. That waiting period style was predominant about 10 years ago, but the shift to voluntary benefits brings added pressure to waive waiting periods. That pressure comes from clients who are now paying for plans with their own money and want to be able to use their benefits as soon as they sign up. All of these changes mean companies need to be more nimble and accepting of change, because it’s unlikely the shift to more voluntary coverage is the only change we’ll be dealing with as insurance providers look to the future.