What is voluntary, exactly?
The voluntary business is thriving and will continue for the foreseeable future. Brokers plan to start or expand their voluntary efforts across the board as 100 percent employer-paid business shrinks and gives up benefit market share.
As the industry marches forward, our definitions need to keep pace with marketplace developments.
In the early 1990s, Eastbridge created the standard industry definition of voluntary as “benefits that are 100 percent employee-paid and paid for through payroll deduction.” While that definition will work for the majority of sales for the next several years, the growth of defined contribution strategies will challenge the industry to update the definition when the time is right.
Consider a private exchange with a defined contribution strategy as the driver. The employee signs in, and sees the employer allocation ($100 a month for example). The employee then chooses her medical plan, disability, and maybe life and CI. The total cost might be $150 per month, with the remaining $50 to be payroll deducted from her paycheck.
Do we allocate the employer portion to medical first, considering it employer-paid, and consider the rest to be voluntary coverages? Or do we spread the premium, considering all coverages to be contrib? And in that case, since none are 100 percent employee-paid, are none of them “voluntary”?
The key could lie in the decision-making process. The essence of voluntary is that the employee is choosing whether to make a purchase, and is then allocating dollars that she could have spent on other products, to pay 100 percent of the cost. Regardless of whether those dollars come directly from the employer or whether they pass through the employee’s paycheck, they are still hers to spend (or not), as she sees fit. By that definition, all products offered in a defined contribution environment become, by definition, voluntary.
Brokers are planning a major resurgence—either through initial entry or by doubling down on current efforts—into voluntary, which will certainly add to the continuing growth trajectory of voluntary sales.