Health Care Reform and the Voluntary Insurance Market

Now that health care reform is a reality, many small-business owners and human resources professionals are assessing what the Patient Protection and Affordable Care Act (PPACA), commonly known as health care reform, means for their organizations.

With the goal of supporting small-business owners and HR executives in achieving their benefits objectives, it is important to understand reform’s implications for the voluntary benefits market.

Health care reform focused on major medical health insurance. Since voluntary insurance—also known as supplemental insurance—is not major medical insurance, the voluntary benefits sector is excluded from most of the insurance and market reforms mandated by the new law. And supplemental coverage pays cash benefits directly to policyholders.

Impact on Supplemental Insurance Plans

The primary focus of health care reform is to ensure that Americans of all ages and incomes are protected by creditable, comprehensive major medical health insurance. Because supplemental insurance isn’t major medical insurance, the reform has limited effect on those products. Supplemental insurance plans help people cope with incremental out-of-pocket costs associated with serious accidents or illnesses—costs major medical insurance was never intended to cover. In the event of a serious accident or illness, participants receive cash benefits that are often used to help with daily living expenses, such as rent, gas, groceries, babysitting and other necessities, as determined by the policyholder.
Although health care reform does not directly apply to the voluntary insurance sector, several related trends exist that may increase the demand for supplemental insurance:

1. Flexible Spending Account limitations and caps will likely create more out-of-pocket expenditures that are not eligible for reimbursement.
2. With the establishment of minimum standards and the option to choose between employer-provided plans or exchange plans, major medical coverage will likely become more homogenous than it is today,  making an employer’s supplemental insurance offerings a greater differentiator than ever before in the talent marketplace.
3. Whether they are insured through employer or exchange plans, employees will continue to grapple with rising out-of-pocket health care costs, which will increase demand for supplemental insurance to help with expenses associated with a serious accident or illness that major medical insurance was never intended to cover.

Helping provide peace of mind remains a key outcome of voluntary insurance policies, which are offered to employees at no cost to employers. Because cash is always welcome in the event of sickness or injury, the added protection voluntary insurance offers will continue to be in strong demand by individuals.  An illustration of this can be found in Japan, a country that has long had a national health care system in place and whose citizens highly value voluntary products.
With health care costs on the rise, employees are placing an even greater importance on their benefit options. Business owners and HR executives may find that offering supplemental insurance to employees can enhance talent acquisition and retention efforts, while also providing potential cost savings on the employer portion of FICA, FUTA and workers’ compensation insurance premiums.

Voluntary insurance isn’t major medical insurance. Voluntary Benefits products pay cash to help policyholders cope with daily living and out-of-pocket expenses associated with accidents or illnesses—costs major medical insurance was never intended to cover.

About The Author

David Pringle, Senior Vice President of Federal Relations, has more than 30 years experience in a variety of roles at Aflac. He began his career with Aflac's sales forces as a sales associate and quickly advanced to state sales coordinator. During his tenure at Aflac, Mr. Pringle was the Assistant Agency Director for the West Territory and Director of Training. He was appointed to his current position in 1990 to coordinate Aflac’s government relations and lobbying efforts in Washington, D.C.  For additional information, please visit aflac.com.