Individual Benefits Insurance vs. Voluntary Benefits Insurance

Although voluntary and mandated, or non-voluntary, benefits offer similar types of coverage, they differ in critical ways. Dive into this article and improve your understanding of which benefit option better fits the needs of your employees and your business.

While many companies protect their employees through a traditional group health insurance plan, there are other coverage options for business owners to consider. Depending on the size of the business, the number of employees covered, and the budget available to the business owner, individual insurance coverage and/or voluntary benefits programs can provide valuable workplace benefits.

What Are Voluntary Benefits?

Voluntary benefits are additional insurance offerings that employees voluntarily choose to add to their workplace benefits package. But what is voluntary insurance? Typically, these benefits or types of insurance are fully paid attractive benefit offering for employers, since there's no direct cost to the business. Even though employees shoulder the cost, many workers still highly value this benefit, since it provides an opportunity to purchase insurance offerings at a group discount that may otherwise be unavailable to individuals.

Due to the rising costs of health care, employers may be particularly interested in understanding what voluntary health insurance is. Like other forms of voluntary benefits, voluntary health insurance is healthcare coverage that is paid for by the employee. Depending on the size of the business there are different voluntary healthcare coverage programs that are available. All employers should carefully weigh their options when choosing employee healthcare coverage to make choices that maximize benefits and savings for employees and the business.

How Do Voluntary Benefits Work?

In many cases, eligible employees will elect their voluntary employee benefits options as part of their regular benefits elections. Since voluntary benefits are separate policies not regulated under the Affordable Care Act (ACA), some coverages can be added at any point throughout the year (does not apply to PEO Sponsored Plans). However, enrollment for healthcare coverage generally coincides with the healthcare open enrollment period for ease of managing and administering elections.

What Are Some Examples of Voluntary Benefits?

What are voluntary benefits for employees? A voluntary benefits program can include any or all of the following coverage types:

• Short-term (except 5 states have mandatory benefits) and long-term disability insurance — This insurance could replace part of the employee's income for several weeks or months in the event of an injury or disability that prevents the employee from resuming normal work duties. The specific amount of replaced income and length of coverage provided varies depending on the policy agreement.
• Life insurance — This insurance provides a large financial payout to a named beneficiary upon the death of the insured. Individuals can purchase either term or whole life insurance on a voluntary basis, but this may require additional medical exams to evaluate the health of the insured based on the amount of life insurance coverage applied for.
• Dental and vision insurance — These benefits are the two most popular options, as they provide coverage for common preventative care issues. If offering dental or vision coverage as a group policy is too costly for a business, dental and vision coverage can easily be offered through a voluntary benefits plan.
• Hospital indemnity and critical illness — This protects against large financial burdens due to costly medical diagnoses or treatments. Cancer treatments, home health care, and extended hospital stays can all incur extensive medical bills, so this coverage is designed to help defray some of those costs.

What Is Individual Insurance?

Individual insurance is a health plan that covers a single employee with an option to add coverage for that employee's eligible family members. If the business consists only of a single consultant, freelancer, or sole proprietor, individual insurance may provide necessary medical coverage in a situation where group health coverage may not be available. Individual policies can also be tailored to the individual employee's needs, and employees can shop around for an individual health insurance plan instead of using one chosen by their employer.

What Are Some Examples of Individual Insurance?

Individual insurance programs can include any or all of the following:

• Health coverage provides the insured and eligible dependents with medical insurance for doctor and hospital visits as well as prescription coverage.
• Vision coverage provides the insured and eligible dependents with discounted rates or insurance coverage on eyeglasses, contacts, annual eye exams, and other vision care.
• Dental coverage provides the insured and eligible dependents with either insurance or discounted rates for preventative and curative dental care.
• Long- and short-term disability insurance provides financial compensation in the event the employee is injured and must take a significant amount of time off work because of the injuries (typically longer than two weeks).
• Life insurance provides a large financial payout to a named beneficiary upon the death of the insured. Life insurance plans can be in the form of term insurance, which only guarantees protection for a specified period (typically 10 or 20 years), or whole life insurance, which guarantees coverage for the insured's entire lifetime if the policy premiums are paid when due.

Voluntary vs. Non-voluntary Dental Insurance and Vision Insurance

Vision and dental plans are excellent candidates for either voluntary or non-voluntary individual insurance. These are additional forms of health insurance and play an important role in your employees' overall health and wellness. Whether voluntary or non-voluntary, helping your workers afford vision and dental coverage can improve their productivity and satisfaction with your benefits program.

When Can You Enroll in Individual Health Insurance?

There are two types of enrollments in individual health insurance — open enrollment and special enrollment.

Open Enrollment for Individual Health Insurance

Since the enactment of the Affordable Care Act (ACA), individuals can no longer purchase health insurance — even individual policies purchased separately from employer-sponsored insurance plans — at any time. Instead, most insurance is purchased during a designated time of the year known as open enrollment. Since 2018, the period of open enrollment for individual health insurance has been November 1 through December 15 of the previous year for a January 1 effective date, plus December 16 through January 15 for a February 1, effective date, and these designated time windows are expected to remain in force for the next several years. However, there are some states that operate their own health insurance exchanges, so the exact open enrollment deadlines can vary from state to state. Also, there are certain life events that qualify for a special enrollment period.

Special Enrollment Period for Health Insurance

Individuals who did not purchase a health plan during open enrollment for individual health insurance can become eligible to get new individual insurance coverage if they experience one of several qualifying life events. These events represent significant life changes for individuals and families, so experiencing such an event will provide an opportunity to make changes to existing coverage or purchase new coverage. You can find out if you qualify for the special enrollment period on healthcare.gov, the federal government's health insurance exchange website, but life events that qualify individuals for a 60-day special enrollment period for health insurance include:

• Getting married
• Getting divorced
• Having a baby, adopting a child, or placing a child for adoption or foster care
• Moving
• Becoming a U.S. citizen
• Leaving incarceration
• Losing other health coverage due to job loss, divorce, COBRA expiration, or aging off a parent's plan
• Losing eligibility for Medicaid or the Children's Health Insurance Program (CHIP)
• A change in income or household status that affects eligibility for premium tax credits or cost-sharing reductions
• Gaining status as a member of a Native American tribe

What Are Mandated Benefits for Employees?

Depending on the size of your full-time workforce, there are some mandated benefits for employees required by law. These benefits can include and disability insurance. Just like voluntary vs. non-voluntary insurance, there is a difference between mandatory vs. voluntary benefits. By law, mandatory benefits are paid for by the employer whereas voluntary benefits are paid for by the employee.

Voluntary vs. Non-voluntary Insurance Plans

Understanding the similarities and differences between voluntary and non-voluntary individual insurance coverage is critical to finding the right benefits package that allows a business to optimize funds and offer competitive employee benefits.

Similarities Between Individual Insurance and Voluntary Benefits Insurance

Both individual insurance coverage and voluntary individual benefits can be of value to employees since they share some notable similarities:

1. Both insurance types are customizable. When choosing an individual plan or when choosing voluntary benefits, individuals can select the coverage options that are best for their needs, family size, and budget.
2. Both insurance types can cover dependents. With both individual insurance coverage and voluntary benefits options, eligible dependents, such as a spouse or children, can be added to the policies for an additional charge.
3. Both insurance types can cover a variety of benefits. Dental, vision, disability, and life insurance are just a few examples of coverage that can be provided through either an individual policy or through voluntary benefits.

Differences Between Individual Insurance and Voluntary Benefits Insurance

Although individual insurance and voluntary benefits can both be used to provide well-rounded coverage in a variety of situations, there are few significant differences between these two coverage types.

1. Voluntary benefits are sponsored by the employer. Since voluntary benefits options are only offered through an employer-sponsored plan, individuals who are not employed will not have access to these options. Additionally, the employer chooses which benefits will be offered and at what coverage levels, giving employees less flexibility than with an individual plan.
2. Individual insurance is completely paid for by the employee, unless an employer sponsors a Qualified Small Employer Health Reimbursement (QSEHRA) or Individual Coverage Health Reimbursement Account (ICHRA) While many business owners will pass the full cost of voluntary benefits on to their employees, this isn't a requirement. Some employers will cover a portion of voluntary benefits elections for their employees. With individual insurance coverage, however, the employee bears the entire cost.

Looking to get started with individual and voluntary benefits insurance? We can help.

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