Ready to liven up client benefits? Suggest a shopping spree

The defined contribution concept isn’t widely used in the enhanced benefits space (also known known as “voluntary”). But when communicated properly, it’s a powerful and innovative tool that brokers can bring to their clients.

I always ask employers, “Why do you pay for benefits such as life, dental, vision and disability?” Their response tends to be: “They’re nice benefits. Our employees like them.”

When I question them further, it often turns out that the same employer-funded benefits suggested by their original broker are still being offered simply because it was what everyone else in the industry was doing. It’s a never-ending cycle that amounts to small thinking. Employers spend so much money each year funding those four plans, but claims data show the vast majority of employees rarely even use some of these benefits, which won’t do anything to help attract and retain top-notch talent.

So instead of just arbitrarily picking four products that were important to offer (and pay for) 20 or 30 years ago, why not take the money being spent on those products, divide that dollar amount per month among employees and offer them a use-it-or-lose-it shopping spree? Let them pick and choose among a plethora of benefits which, after proper and thorough education, they may determine is much better suited to their individual and family needs.

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If an employee really wants the most elaborate, robust dental plan, then fine. They can use all of their money for that. Same goes for critical illness, accident, cancer, hospital indemnity, etc. There are so many different types of benefits and different combinations. The idea is to empower employees to become true consumers of healthcare and make true consumer-driven benefits decisions.

Another way to explain it to clients is, as an employer, if you offer to buy lunch for the entire office and hand them a menu to choose from, do you care if they order a salad or a panini? What’s the difference? The employer is spending the money either way, and the employee is happy in choosing what they’d most like to eat. Offering a benefits shopping spree is the equivalent of a tasty buffet, which will prove to be a more satisfying meal.

If you forgo the options and provide something they don’t like to eat or drink, it’s a waste of money. So why not treat benefits the same way? Give them a meaningful menu of benefits and guidance to choose proactively how to spend their allocated benefit dollars.

Just offering dental, vision, life and disability as employer-funded coverages check off a box for most brokers, but how is that innovative? How is that different? How does that set you apart from the competitors in your marketplace? It doesn’t. But a benefits shopping spree does.

What differentiates advisers and their employer clients alike is that they dare to be different. You’re not asking the employer to spend more money, but rather to reallocate the money for benefits so that it gives employees a say in how they spend it. More often than not, the employee will match, and many times, even spend more per month, when the employer has skin in the game, too.

This approach, as simple as it sounds, is a game changer for brokers to differentiate themselves in the marketplace.

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Often, the question comes up, “What about employers that don’t offer any type of employer-funded dental, vision, life and disability? Or those who don’t even offer any health insurance?” If you ask any employer why they don’t do it, the typical response is cost. They simply can’t afford it. Ultimately, in these types of situations, I take the “something is better than nothing” approach.

Ask the employer what dollar amount per month they’d be able to allocate per employee for benefits. Typically, they’ll say $50-$150, but the actual amount doesn’t matter. Rather, it’s the concept that any dollar amount put toward a platter of different benefit options that provide a tremendous level of choice for employees who before had nothing is extremely valuable.

Additionally, the DC model allows the C-suite to truly take charge and be in control. The result is a forecastable and predictable way to manage the benefits supply chain by budgeting for any increases they feel are prudent if and when they’d like to do so. It’s much better than allowing carriers to raise rates nearly every year for whatever reason they want.

Under this approach, the employer is able to spend reasonable amounts that it can actually budget for and afford. Employees are now getting benefits that they never had before, which strengthens the relationship they have between themselves and the employer. And the adviser-client relationship is strengthened as well. With everyone empowered, offering a benefits shopping spree is a winning formula that will help any client’s benefits package come to life and ultimately fuel business growth.