Specialty Benefits Pt. 1: Supplemental, Ancillary, Voluntary & More
You may have heard the terms supplemental, ancillary and voluntary used somewhat interchangeably when it comes to describing certain benefits. And generally speaking, all of these terms may refer to the same types of coverage apart from medical insurance, such as vision, dental, life, disability, accident, critical illness, hospital indemnity and more. So when it comes to terms like supplemental, ancillary or voluntary, there is little difference in terms of the benefits themselves, though there may be differences in terms of who pays for them and how they are offered. So why has this grouping of benefits been called so many different things?
Supplemental or Ancillary = Specialty
When people typically think of “benefits” their first thought is usually of “health insurance” or “major medical insurance” to cover doctor visits and procedures, including some basic hospital costs. Any other types of insurance that add to the basic medical offering, such as Hospital Indemnity, Critical Illness, and Accident, may be termed supplemental because they supplement basic medical coverage. Dental and Vision coverage may also fall into this category. Other “protection” vehicles such as life and disability are generally termed ancillary, meaning something in addition to the main thing.
The distinctions are somewhat loose in the industry; however, we feel these types of terms are a misnomer. By treating these benefits as “additional,” it makes them sound like they are somehow less important and can be overlooked. At Liazon, we believe that total protection means understanding and choosing from the complete array of benefits that are available based on an individual’s unique circumstances, and that all of these benefits work together to ensure peace of mind and financial security should the unexpected occur.
The term specialty benefits is a way to broaden the definition of these types of benefits to help individuals better understand their importance.
Employer-Paid vs. Voluntary Benefits
Another distinction worth noting is that of “employer-paid” versus “voluntary” benefits. Benefits in addition to medical are sometimes called voluntary (or contributory) because the employee may have the option to purchase these through their employer’s plan, but they have to cover all (or some) of the costs for them on their own. In fact, a 2014 survey by Aflac reported that “42 percent of respondents said they weren’t prepared to pay the out-of-pocket costs associated with a serious illness or accident, precisely the kinds of events voluntary options cover.”
Even if employees are contributing to their own voluntary benefits, they may still receive “preferred group underwriting” through the group plans offered for these products by their employers as opposed to purchasing them on their own. Also, the cost for some of these benefits may be made on a pre-tax basis, saving the employee even more money.
A benefit is considered employer-paid if the employer pays the cost of the coverage for employees, as is usually the case with company-provided group health insurance. Employers may also contribute to other benefits such as Life or Disability insurance, and these benefits may be considered tax-free as well. If an employer sponsors a life insurance or disability plan for employees, the employee may also be able to supplement these plans with additional coverage made available through their employer, if they feel the coverage is too low for their needs.
But, in an exchange world, terms like “voluntary” or “employer-paid” lose their meaning. Why? Because in a private benefits exchange model, employees get to choose the medical and other benefits they may want; they are all in a sense “voluntary” choices. With a fixed amount of money allocated from the employer to the employee, known as “defined contribution,” employees shop marketplaces stocked with a variety of products to choose the ones that best suit their needs – be they medical, dental, life, even pet or legal services. Through the Bright Choices® Exchange, we present the offerings, educate employees as to why they may need them, make a recommendation, and ultimately let the employee decide for themselves.
So, whatever you call them, these specialty insurance products are an important part of a complete coverage portfolio and should not be overlooked when choosing benefits.