Employers are increasingly asking workers and retirees to pay for some or all of the cost of many benefits — including life, disability, and accidental death insurance — they once took for granted as part of their compensation, according to industry studies.
“This is part of a bigger trend of companies cutting key parts of the total compensation package,” said Shaun O’Brien, assistant policy director for the AFL-CIO labor federation in Washington, D.C. “In many ways we are at a make-it-or- break-it period for the middle class, with all of this cost shifting.”
But insurance executives and consultants say many employers have had to scale back funding for an array of small benefits to offset the rising expense of major medical insurance.
Nearly 1 in 10 US employers said they might replace one or more benefits that were partly or fully subsidized by companies with so-called voluntary benefits that are completely paid for by employees, according to a 2011 survey by Limra, a life insurance trade group in Windsor, Conn.
In a separate survey, Limra reported 40 percent of US employers asked workers to fund the entire cost of accidental death and dismemberment insurance in 2009, up from 28 percent in 2002.
And Mercer, a consulting firm in New York, last year found 76 percent of large employers offered vision insurance that was partly or fully paid by for workers, up from 70 percent in 2009.
Mike Thompson, who leads Mercer’s US voluntary benefits consulting practice, said companies are pulling back primarily because of the soaring cost of medical care. “For at least the past decade, health care costs have been rising significantly above the consumer price index,” Thompson said.
For workers, he said, that means a new reality: “These are, in fact, benefits and they are not entitlements.”
In some cases, employees may not yet be aware they are paying 100 percent for some benefits, such as vision and dental insurance. Companies do not usually tell workers what percentage of benefits they are subsidizing, but simply send them a roster of benefits each year with the amount they must contribute to enroll.
“For the most part, employees don’t know how much their employers are paying” toward benefits, said Anita Potter, assistant vice president at Limra. “Companies don’t typically say, ‘You are now paying 100 percent.’ ”
Some workers are fighting to get benefits restored. Former employees of SuperMedia Inc., a Yellow Pages directory firm in Dallas spun off from Verizon Inc. six years ago, are in a legal battle about benefits cuts.
The company has asked retirees to pay a growing share of some benefits, such as health and dental care, both of which they once received for free. Starting in 2014, the company will stop subsidizing life insurance, medical, dental, and vision coverage and will eliminate those benefits for retirees eligible for Medicare.
Phil Murphy, 68, a Millis resident who retired from the Yellow Pages unit in 1996, before it became a standalone company, said he is particularly worried about the cost of obtaining life insurance at his age.
“Between life insurance — if it’s even available — and health care costs, it will be thousands more a year,” he said.
Murphy and other former employees sued Verizon in 2009, arguing they should have kept their old benefits when the unit was spun off.
Verizon said its actions were “consistent with the law” and SuperMedia declined to comment.
In addition to charging employees more for some benefits, companies have been increasing workers’ share of health insurance costs with higher premiums and copayments. Others have switched to cheaper medical plans that are less comprehensive and have higher deductibles.
Compared with health insurance, however, some employee-paid benefits are relatively inexpensive, particularly for modest levels of coverage. And companies typically offer group plans with steep discounts over what some workers might pay as individuals.
For instance, a $25,000 permanent life insurance policy might cost $260 to $312 a year, and a short-term disability insurance policy that pays $1,200 a month might be a little more than $300 annually, according to Unum, one of the largest providers of group and voluntary benefits.
It’s also easier to obtain such benefits through an employer. For example, employees often do not need to fill out applications or undergo physical exams to obtain basic life insurance through an employer.
“It can be a better deal for workers than having to look for it on their own,” said O’Brien.
Chris Gauthier, an engineer at WFXT-TV (Channel 25) in Boston, pays $195 per year for disability insurance and never considered shopping for it on his own. “It was so convenient to buy it from work,” he said.
Fox Television Stations Inc., which owns the station, declined to disclose what percentage of the benefit it subsidizes.
The move toward employee-paid benefits is also creating opportunities for insurers. Sun Life Financial of Canada set up a division in Wellesley this year to step up its sales of “voluntary benefits” to workers. The company added 17 people to the unit’s sales team last quarter alone and plans to hire more.
“We do have fairly aggressive growth goals,” said Bob Klein, Sun Life’s vice president for voluntary benefits. “We saw the trend.”Todd Wallack can be reached at firstname.lastname@example.org. Follow him on Twitter @twallack.