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Making it Better in the Middle with Voluntary Benefits

By Jon Shuman

About half of American households are considered to be “middle income” earners, many of whom lost ground economically over the past decade or longer, according to an analysis by the Pew Research Center1.  It may be a big reason why, more than ever, middle-income households are seeking help from voluntary benefits through their workplace.

“Middle-income” households are defined by Pew as having an annual income between of between 66 percent and 200 percent of the median U.S. household income. As of 2014, that falls between $24,000 and $73,000 for one person and $42,000 and $126,000 for a family of three.

The 2014 analysis by Pew showed that the American middle class lost ground financially in the vast majority of metropolitan areas from 2000 to 2014, and the shares of adults in the lower- and upper-income ranks rose in most areas.

Meanwhile, middle-income households face dramatically rising costs for healthcare, especially as high-deductible medical plans proliferate. It’s not unusual for a family to face annual healthcare insurance deductibles of $5,000 or even $10,000, a very big and often bitter pill to swallow for many.

A single trip to the emergency room typically costs between $580 and $700 for an adult and costs between $510 and $635 for a child, according to Blue Cross and Blue Shield of Massachusetts2. An unanticipated trip to the hospital to treat a broken arm or sudden chest pains can quickly blow a hole in most families’ budgets.  

It’s one reason why more employers are offering voluntary benefits such as critical illness (CI) and accident coverages to complement healthcare coverage. Companies with high-deductible healthcare plans offer healthcare savings accounts (HSAs) that enable workers to put aside money for medical expenses on a tax-favored basis.

The strategic combination of an accident policy and an HSA may help middle-income earners better manage their out-of-pocket healthcare expenditures, especially when they are confronted with unexpected costs. Here’s a hypothetical example of how that might work:

Let’s say the four-member Evans family with two elementary school-age children is covered by high-deductible healthcare plan and puts $1,000 every year into an employer’s HSA. But Elana, an active second-grader, breaks her ankle falling off the jungle gym and needs surgery. The Evans quickly blow through the $1,000 in their HSA and spend another $1,500 to pay for the $2,500 cost of surgery and related medical expenses.

That’s a significant cost for a middle-income family and can put a real crimp on their budget. Such an expense may cancel out a family vacation or eliminate a down-payment on a new car. But let’s consider an alternative strategy.

Instead of putting the entire $1,000 into her employer’s HSA, Mrs. Evans purchased voluntary accident insurance through work for a total cost of $575. The remaining $425 then went into the HSA.

The family could then have been reimbursed $1,200 through the accident policy for not only the surgery but the ambulance ride, emergency room visit, x-ray, crutches, follow-up appointments with an orthopedic surgeon and rehabilitation.  The out-of-pocket costs would be reduced to $875 after costs for the accident premiums and contribution to the HSA.

While the accident policy would not cover the total costs for Elana, it can help reduce the sting and provide the family with additional financial flexibility.  Meanwhile, the insurance is still working for the family in the case of future accident claims, which would otherwise be paid completely out-of-pocket until deductibles from major medical insurance are satisfied.

As middle-income workers wrestle with personal finance and economic issues, employers are looking for new ways to help. Incorporating the right voluntary benefits may afford both greater financial protection and flexibility for many families. Doing so may ultimately help make it better in the middle.

Jonathan Shuman leads sales of workplace benefits for Massachusetts Mutual Life Insurance Co. (MassMutual).


1Pew Research Center, Are You in the American Middle Class?

2Blue Cross and Blue Shield of Massachusetts, Typical Costs for Common Medical Services,