Supplemental Benefits Your Employees May Need in 2023

You already provide group medical insurance to your employees — and that’s great! But what if they need more medical services than what your plan supplies? To help fill the gap, you can offer supplemental benefits.

Traditionally speaking, supplemental benefits are insurance products that help pay for health-related expenses not covered by major medical insurance.

Let’s assume an employee unexpectedly has an accident or critical illness. Without supplemental insurance, they will need to pay for all accident or critical illness expenses if their major medical coverage runs out.

Employers can assist by offering supplemental employee benefits on a voluntary basis — meaning employees can elect or reject them. You can offer supplemental benefits through your insurance carrier.

Note that in recent years, supplemental benefits have expanded to include products such as life insurance, pet insurance, legal insurance, and identity theft protection.

Below are supplemental benefits your employees may value in 2023.

What are the types of supplemental benefits for employees?

Find out what supplemental benefits you can offer your employees.

Accident insurance

This type of insurance provides a cash payment to help pay for expenses associated with an accident that results in hospitalization or injuries requiring medical treatment. Along with paying for accident expenses, the plan may include accidental death and dismemberment (AD&D).

AD&D coverage pays benefits to the beneficiary if the accident led to the insured’s death or caused them severe injury (e.g., paralysis, loss of a limb, or blindness).

Critical illness insurance

Provides a cash payment for expenses relating to serious medical emergencies or illnesses, such as stroke, heart attack, cancer, and Parkinson’s disease. Such emergencies and illnesses tend to have expensive price tags, and critical illness insurance helps to offset the costs.

Hospital indemnity insurance

This provides a cash payment for expenses associated with hospital stays. The amount is partially based on the number of days spent in the hospital.

Typically, hospital indemnity insurance pays for:

• Surgery and non-surgery hospital stays
• Critical care
• Intensive care

Some plans pay for emergency room visits, ambulance services, and outpatient surgery. In these cases, the policy premiums tend to be higher.

Cancer insurance

Provides a cash payment to help cover expenses stemming from the insured’s cancer diagnosis.

Cancer insurance may cover:

• Deductibles
• Copayments
• Cancer screenings
• Cancer treatments and therapies
• Non-medical costs (e.g., transportation, mortgage or rent, groceries, childcare)

Disability insurance

Makes up the difference between what an employee receives from their long-term disability policy and what they need to keep maintaining their standard of living.

For example, if your long-term disability policy pays 60% to employees who cannot work because of an illness or injury, the supplemental disability policy helps to close the 40% gap.

Dental insurance

Helps pay for dental procedures not covered by the employee’s major medical plan. The policy may cover:

• Routine dental exams
• Cleaning
• Preventative care
• Basic and major dental procedures

Vision insurance

Helps pay for vision procedures not covered by the employee’s major medical plan. The policy may cover:

• Eye exams
• Eyeglasses
• Contact lenses
• Preventative eye care
• LASIK surgery

Life insurance

Provides a financial payout to beneficiaries upon the insured’s death. Many employers give employees basic life insurance, such as between $25,000 and $50,000.

This amount is usually free or low-cost to employees. Since the basic amount may not be enough, you can give employees the option to purchase extra/supplemental life insurance.

Pet insurance

Helps employees pay for their pets’ medical bills.

Pet insurance may cover:

• Accidents and injuries
• Common illnesses (e.g., ear infections)
• Chronic illnesses (e.g., skin conditions)
• Testing and diagnostics
• Surgical procedures
• Hereditary conditions
• Wellness procedures

Legal insurance

Helps employees pay for legal services, such as those relating to:

• Traffic violations
• Estate planning
• Divorce
• Consumer protection
• Property protection
• Bankruptcy
• Home ownership

Identity theft protection

Helps employees cover losses they incurred because their identity was stolen.

Identity theft protection may include:

• Identity restoration assistance
• Detailed credit reports
• Credit score tracking
• Lost document recovery
• Credit monitoring and alerts
• Dark web monitoring
• Expense reimbursement (for lost wages, new credit card application fees, etc.)

Who pays for supplemental benefits for employees?

Oftentimes, employees alone cover the cost of supplemental benefits. Ultimately though, who picks up the tab varies by the type of benefit and what the employer is willing to pay.

Employers that offer major medical insurance usually cover a portion of the cost (e.g., 80%) while the employee shoulders the rest (e.g. 20%). If they also offer supplemental health benefits, such as for accidents and critical illness, then the employee normally pays the entire cost for the supplemental benefit.

However, for supplemental benefits like dental, vision, and life insurance, the employer typically splits the cost with the employee. For less common supplemental benefits like pet insurance and legal insurance, the employee usually pays the full cost.

Employees pay for the supplemental benefits through payroll deduction, and the monthly payments are typically affordable.

Why supplemental benefits are important to your business

It’s common knowledge that strong benefits packages are vital to attracting and retaining qualified workers.

In a tight labor market, supplemental benefits can be a deciding factor in whether a candidate chooses to work for your company.

By offering supplemental benefits, you automatically strengthen your benefits package, which in turn bolsters your competitive edge. In a tight labor market, supplemental benefits can be a deciding factor in whether a candidate chooses to work for your company.

More advantages of supplemental benefits

• Employees can get access to (lower) group rates when they buy supplemental benefits through their employer.
• Certain supplemental benefits are deducted on a pretax basis, delivering payroll tax savings to both the employee and the employer. Such pretax deductions may include dental and vision coverage and life insurance of $50,000 or less.
• Most supplemental insurance policies cover not just employees but also their spouse and dependent children.
• Supplemental benefits are a low-cost attraction and retention strategy for employers. Employees may be content with footing the entire bill. What matters most to them is being able to access the supplemental benefits through their employer.
• Supplemental benefits can enhance financial well-being. For example, employees likely won’t need to raid their retirement savings to pay for unexpected medical services.

The growing demand for supplemental benefits

It’s important for those who manage employee benefits to know that supplemental benefits are becoming increasingly popular among employees and employers.

According to LIMRA, “Workplace life, disability and supplemental health sales increased in 2021 … All supplemental health product lines recorded positive growth in premium in the fourth quarter: accident insurance grew 9%, critical illness climbed 11%, cancer insurance improved 6%, and hospital indemnity experienced 3% growth.”

Per an SHRM report, “…more U.S. employers are offering voluntary benefits and more workers are selecting them during the open enrollment cycle for 2022.” One expert says, “ the growth was driven by employers trying to retain talent amid the Great Resignation and employee demand for supplemental health insurance products during the COVID-19 pandemic.”

Notably, in a Zenefits survey, nearly 70% of respondents “said that fringe benefits and perks are at least as important as employer-provided health insurance and retirement.”

Key considerations for offering supplemental benefits

The types of supplemental benefits you should offer depends on the factors listed below.

• The needs of your workforce, which is driven by individual/family needs plus demographics like age and gender.
• The specifics of the benefit, such as premium costs, coverage limitations, and claims process.
• The administrative burden that comes with offering supplemental benefits. Even if the employee bears all the cost, the employer still has to set up and administer the benefit.
• The expected utilization rate for each supplemental benefit. If an appreciable number of employees do not sign up, then it’s time to rethink offering the benefit.

You can increase participation by educating employees about your supplemental benefits program, including how they enrich employees’ lives and how to access them.

It also helps to know which supplemental benefits your employees are likely to forgo if you do not help with the cost. For details on this, see “How Small Business Employees Really Feel About Their 2020 Benefits and Perks.”