Voluntary benefits 101
A starter guide for busy employers who want practical information about voluntary benefits without the jargon.
Voluntary benefits in a nutshell
Voluntary benefits help pay for out-of-pocket expenses that major medical and other insurance don't cover. Also called supplemental benefits, voluntary benefits are used to meet a diverse range of needs. Examples include paying for out-of-pocket medical expenses, household bills and travel expenses, as well as replacing missed wages. Many employees like that benefits such as disability, accident and hospital are paid directly to them, so they can use them where they are needed.
The beauty of voluntary benefits is they can be customized for the specific needs of a business and their employees, catering to certain vocations, stages of life, location and lifestyles.
Payment options for voluntary benefits include:
- 100% employee-paid
- Partially funded by both employee and employer
- Accident
- Critical illness
- Cancer
- Dental
- Disability
- Life
- Hospital indemnity
- Vision
Advantages to the business
- Enrich benefits package without adding to your bottom line
- Help control rising health insurance premiums
- Attract and retain skilled talent
Advantages to employees
- Valuable coverage at affordable rates
- Flexible benefit options to fit workers' needs
- Fill in gaps in major medical coverage
- Confidence the benefits have been vetted
Myth 1: Affordability
Voluntary benefits can be partially funded or even fully funded by the employee. This means businesses have complete control of how much they spend and what options they choose to add.
Myth 2: Not enough employees to qualify
Depending on the benefits carrier and type of coverage, most businesses with fewer than 10 employees can qualify for many types of voluntary benefits. And some carriers don't have any minimum staffing requirements at all.
Myth 3: Administering a voluntary benefits plan is costly and time-consuming
Many voluntary benefits can be paid with pre-tax income which can save employers and their workers money. Additionally, some carriers can provide technology, tools and educational services that can simplify benefits administration, so small business owners have more time to focus on running their business.
Myth 4: Employees don't value them
While most employers believe employees value take-home pay over benefits, employees actually value non-medical insurance benefits and voluntary benefits more than employers realize.
Who can get voluntary benefits?
Employees, spouses and eligible dependent children and business owners are eligible. Part-time workers can also get coverage if they meet their employer's eligibility requirements such as minimum hours worked.
Most carriers start with three eligible employees. But the minimum can vary depending on the carrier and specific benefit.
Several types of voluntary benefits offer guaranteed coverage — meaning workers can get coverage without answering medical questions. Some voluntary benefits may require health questions or have a pre-existing condition clause.
Administration and costs
If you work with the right carrier, it will be quick and easy. Look for carriers that offer free online benefit admin tools to manage your employees' benefits and pay your invoices electronically.
Employees can typically change their coverage throughout the year when they experience a qualifying life event, such as marriage, divorce, death, as well as the birth or adoption of a child. Otherwise, employees can only make changes during annual enrollment.
The versatility of voluntary benefits is designed to be affordable for a wide range of incomes. The cost of each coverage will vary depending on options and demographics.
Health care and voluntary benefits
Yes. But if your workers have insurance through a third party (for example, spouse's company, ACA exchange, Medicare) or they don't have it at all, they should understand that voluntary benefits aren't a replacement for major medical coverage.
If the voluntary benefits are paid with pre-tax income, the plan will need to be modified. If they are paid with post-tax dollars the plan won't need to be modified.
While many carriers are covering COVID-19 in their existing coverage, you should check each type of insurance to make sure. Disability and hospital indemnity are good candidates for coverage.
Filing a claim, getting paid
Select a carrier with a reputation for quick turnaround and easy electronic filing tools. This includes filing claims online or through a mobile app, access to customer service support and the ability to pay claims by direct deposit.
Claims for voluntary benefits aren't coordinated with health insurance plans or other third-party insurance companies at all. This means any voluntary benefit paid to the employee is based only on the claim filed.
Voluntary benefits 101
Strengthen your business with our quick start guide on voluntary benefits and build a well-rounded benefits package that helps attract and retain skilled workers.