Testing Limits of Flexible Benefits : One Firm Lets Employee Trade Insurance for Leased Car

Where there’s progress, there are always extremists. So it should come as no surprise that companies embracing with gusto the notion of flexible benefits are actually allowing employees to trade in their life insurance policy for a company-leased Volvo. Or opt out on dental care in exchange for an MBA at a prestigious business school.

Such trade-offs may seem to test the limits of consumerism, but management experts say bartering away traditional health care coverage for other benefits will become more widespread as corporate America moves to contain medical costs and respond to the needs of changing workforce demographics.

“I’ve heard of one man who negotiated to forfeit his life insurance to get an MBA at Northwestern University,” says Marilyn Moats, founder of Career Strategies, a career planning and management consulting firm. “A lot of companies are saying ‘We have to do this to get the best people.’ ”

Moats says she has run into a few cases at high-tech companies where employees were allowed to swap health care coverage for a company car. Such trade-offs usually are made sparingly to retain key employees. But as the work force continues to shrink, Moats and others believe companies will become increasingly willing to negotiate when it comes to cutting benefit deals.

Steelcase Inc., noted to be among the most aggressive companies in trying out new management ideas, hasn’t taken to bartering health care for station wagons. But it does recognize that all employees are not alike.

The Grand Rapids, Mich.-based furniture maker’s 8,500 employees are given benefit dollars to spend, based on their income and family status. The bigger your family, the more dollars you get. With the money, employees can buy from a basket of fringes that includes everything from child care to home medical care to extra retirement income.

Ben & Jerry’s Homemade, an ice cream maker in Waterbury, Vt., is considering adopting a similar plan. If given the nod by the company’s board, the plan would require every employee to have basic health coverage, but how much or little would be each person’s decision. Besides health care, employees could spend their money on day care, legal services, care for seniors, education, any number of things.

“We haven’t decided specifically how the plan will work,” says Patti Harvey, the company’s benefits administrator. “But eventually we expect to be fully flexible. We have a very young population of workers. And not all are interested in getting a lot of medical care.”

The types of health benefits people are willing to forego depend largely on their specific needs, according to Ken Feltman, executive director of the Employee Council on Flexible Benefits. Single employees tend to favor vacations over life insurance. But as their age and family size increases, so does their interest in life insurance. Old age may bring an enhanced appreciation for dental coverage.

With the escalating costs of health care touching a raw nerve at most companies, they see the shift away from medical benefits as welcome news. Although most firms say their decision to offer flexible benefit plans was motivated more by competition than cash, those who have made the shift are wealthier for it.

Employers with some type of flex plan reported $2,280 in health care costs per employee last year, about $200 less per employee than companies with fixed plans, according to a new survey.