By Mathew Augustine, GPHR, REBC
CEO, Hanna Global Solutions
The advent of state insurance exchanges last year has promoted a paradigm shift in the distribution and sales of insurance programs as part of employee benefit programs. Individuals using their ‘own’ funds to pick from virtual ‘store shelves’ of a wide range of insurance products is not an experience limited to employees of large corporations supported by big technology and service operations anymore. Consumers are making ‘purchase’ decisions as opposed to employees making ‘enrollment’ decisions; choice is being driven from ‘lowest price’ to ‘highest value’; decisions are moving away from employers preselecting a set of comprehensive plans on behalf of their employees, to employees putting together a portfolio of insurance products to suit their specific situation.
Many have compared this paradigm shift to the change that happened in pension plans from defined benefit to defined contribution. This one is even more significant. An employee can make some default decisions (or employers can decide for them) when it comes to 401(k) plans, at the time of enrollment, and then later change fund selections and rebalance their portfolio at any time during the year. This is not the case when it comes to insurance products in an employee benefit portfolio – you have to choose your portfolio at the time of enrollment and are stuck with it for a year until the next open enrollment window.
This places a lot of responsibility on advisors and employers to educate employees and communicate all the benefits and programs that are being made available. It takes the responsibility of employee benefits communication up a level. Classic marketing discipline must be applied to do this right. It is useful to consider the four P’s of marketing – product, place, price and promotion.
Product: A full variety of insurance products can be put together. If offered a range of medical plans, these plans must be complemented by supplemental plans such as critical illness and accident plans so that those choosing high deductible plans can gain protection against catastrophic situations. A young, healthy person should be able to select a low cost, high deductible plan design and redirect the premium savings to a health savings account (HSA) to build a fund for later years of higher utilization.
Place: These products must be offered in an easy to understand, easy to select ‘shelf’. Only those products that are eligible to a person must be presented to him or her, with clear ‘labeling’ of product features and price. That person should also be able to make comparisons among options available, without being limited in their options or decisions being made for them based on some broad generalities.
Price: The benefits manager in a company takes on the role of a product portfolio manager with the responsibility to set the right product-price mix. Use of the defined contribution model of employee cost sharing, with the right combination of options for employees to use their employer contributions, can help realize an employer’s benefit strategy, and help employees make decisions that are appropriate to their family situation and risk tolerance.
Promotion: Clear communication of the benefits program has always been a significant contributor to the level of satisfaction that employees have of their benefits program. The range of options presented, the independent decision making by employees on their choices, and additional products available, all make communication more challenging and necessary. Add to this the compliance overheads of statutory notices and plan documents, the proper promotion of benefit programs requires a professional marketing approach.
The good news is that this marketing approach, if executed well, will deliver results in multiple areas – employee satisfaction, cost control, regulatory compliance, and employee engagement. It is time for HR and employee benefits teams in companies to develop marketing in their skillsets or employ full-time product management or marketing communications specialists to market their employee benefits portfolio.
Download a complimentary copy of the UBA white paper, “A Business Case for Benefits Communications,” from http://bit.ly/1gJR3GE.