Voluntary Benefits: The New Litigation Frontier. Are Your Plans Leading You Into a Lawsuit? Employers & Brokers Beware!

The landscape for Employee Benefits shifted dramatically in late 2025 and the first week of 2026. Voluntary or "worksite" plans—once considered "safe harbor" products exempt from most legal scrutiny—are now the primary target of high-stakes class-action litigation.

Why These Plans Are Suddenly "Under Fire"      

In late December 2025 and January 2026, the law firm Schlichter Bogard LLC—the same firm that revolutionized 401(k) litigation—filed a series of landmark lawsuits against major Employers like United Airlines, LabCorp, and Community Health Systems (CHS).

The Fuel of the "fire" Involves Three Specific Allegations:

1. Excessive Commissions: Lawsuits claim Brokers are receiving "unreasonable" commissions (often 22% to 40%) for products like Accident and Critical Illness Insurance, which participants pay for entirely out of pocket.
2. Low Loss Ratios: Plaintiffs argue these plans offer poor value, often paying out only pennies in claims for every dollar collected in premiums.
3. Fiduciary Breach: Because Employers integrated these plans into their Benefits Portals and Form 5500 filings, courts are increasingly ruling that they must be managed with the same "Fiduciary" care as a 401(k) plan.

The Current "Targeted" List for Litigants - The lawsuits are not just naming Employers -- They are naming the "Big Four" consulting firms as well:

1. Employers: Cited for failing to negotiate better rates for their workers.
2. Brokers/Consultants: Alleged to have a "conflict of interest" by recommending high-commission plans over lower-cost alternatives.
3. Vendors: Specifically focusing on high-margin supplemental products often provided by companies like Aflac or Colonial Life.

What Employers already are mentioned in lawsuits:

• Community Health Systems (CHS) Inc.
• Laboratory Corporation of America Holdings
• United Airlines
• Universal Services of America LP

What Consultants are already mentioned in Law Suites?

• Gallagher Benefit Services Inc.
• Mercer Health & Benefits Administration LLC
• Lockton Companies LLC
• Willis Towers Watson US LLC

Why is the Voluntary Benefit "Safe Harbor" Status Failing?

The primary defense for voluntary plans has always been the DOL Safe Harbor. To stay exempt from ERISA, an Employer must not endorse the plan. The new lawsuits argue that the exemption is being voided because:

• Active Selection: Employers are hand-picking the carriers and brokers.
• The Enrollment Guide: Including these plans in a formal benefits guide is now being viewed as a fiduciary endorsement.
• Form 5500 Filings: Many Employers have been inadvertently checking the ERISA-covered box on their annual filings for years.

In terms of Damages - it's all about the numbers! The Litigators claim that Insurers, Brokers, Consultants and other parties collect inordinately high premiums out of the Employee's paychecks while the Brokers, Consultants, PEOs, and others collect unjustifiable Commissions from the Insurers. In most cases, the Employer did not perform Due Diligence and neglected their Fiduciary Responsibilities to the Employee!

It's All About The Numbers!

To gain some insights into Pricing, Profitability and Commissions Paid for Voluntary Benefits, I went to AI (Gemini}. Here's some insights provided: Are the Voluntary Benefit Plans Profitable? Yes - Selling Voluntary Benefits is extremely profitable for Insurers and Brokers—In many cases, it is now more profitable than selling the Primary Medical Plan itself. > As Medical Insurance commissions have become "squeezed" by Federal Regulations (like the Medical Loss Ratio), Brokers have pivoted to Voluntary Benefits (Accident, Cancer, Critical Illness, Pet Insurance, etc.) to maintain their profit margins. > The Voluntary Benefits Commission Multiplier (4x to 10x higher than Health Plans) > The Commission Percentage - While Medical Plans: Brokers typically earn 3% to 6% (or a flat $20–$40 per employee), > Voluntary Benefit Plans are far more lucrative than Health Plans: Take a Look -

• 1st Year Commissions - Voluntary Plan Brokers often earn 20% to 70% of the first-year premium while the participating Employee pays month-by-month.
• The Math -- If an Employee spends $500/year on voluntary coverage, the broker might make $200 in commission. For a 30-person group where 20 people sign up, that’s $4,000 in nearly pure profit for the Broker, often for doing just a few hours of extra work during open enrollment.
• Heaped Commissions – The Broker can take a massive payout in year one (e.g., 65%) and a small amount in later years. This is highly profitable for "Hunters" who focus on new sales - often neglecting existing policy holders.

Size of the Voluntary Benefits Market in Dollars - The Market Size (2024–2026) According to the most recent comprehensive industry reports from firms like Eastbridge Consulting Group and LIMRA > Total In-Force Premiums: $56.6 Billion (as of the start of 2025). This represents a 6.1% growth over the previous year, showing that once employees buy these plans, they are keeping them. > New Annual Sales: $9.53 Billion (2024 full-year). This is the total amount of new business written in a single year.+1 > Early 2025 Performance: LIMRA data through September 2025 showed $3.37 billion in new sales, a slight 3% dip from 2024, indicating the market is maturing after a post-pandemic surge.

Voluntary Benefit Plans Market Share by Product - Not all Voluntary Benefits are equal! The "Fiduciary Legal Trap" mentioned earlier is most dangerous in high-commission products like Accident and Critical Illness, which are currently the fastest-growing segments. Product Category Market Share (In-Force) & Growth Trend (2025-2026) Life Insurance~ 28% Stable (Dominant product) Dental~ 15% High demand; stable Accident Insurance~ 12% Strong growth (10%+ CAGR) Critical Illness~ 10% Explosive growth (13% increase) Disability~ 15% Stable; moderate growth Hospital Indemnity~ 7% Rising fast due to high deductibles

Key 2026 Drivers for the Voluntary Benefits Markets - Three factors are pushing the voluntary market toward the $60B+ mark by the end of this year:

• The GLP-1 Effect: As employers exclude weight-loss drugs from major medical plans to save costs, they are adding "Critical Illness" or specialized "Chronic Condition" voluntary plans to help employees pay for them.
• Deductible Cushioning: With the average family deductible hitting $1,886 for singles and much higher for families in 2025, Voluntary "gap" plans are becoming mandatory for the average worker.
• Consolidation: Large brokers (Gallagher, Mercer, etc.) are now responsible for over 70% of all voluntary sales, which is central to the "conflict of interest" claims in recent lawsuits.

What Should Employers Do To Reduce Their Exposure To Litigation?

This is a "Stop-And-Take-Action" time for Employers who currently offer Employees Voluntary Benefit Plans. Others in this Insurance space, Including: Brokers, Consultants, PEOs, Administrators, Enrollment Companies should also take immediate action. The legal landscape for Employee Benefits just fundamentally shifted in the first week of 2026. Act Now - The "head in the sand approach" is a Liability! At least take these actions:

• Under the Consolidated Appropriations Act (CAA), your broker is legally required to disclose all direct and indirect compensation. If they haven’t given you a written disclosure for your voluntary plans, you are at risk.
• Benchmark Your Loss Ratios: Ask your carrier for the loss ratio (claims paid vs. premiums collected) of your specific group. If its under 50%, you may be offering a low-value product that attracts litigation.
• Audit Your Safe Harbor Status: Review your benefits guide and enrollment portal.
• Are you endorsing these plans or simply acting as a payroll pass-through?
• Communicate with Employees - Meet their Needs and Budgets!

What' Next?

More legal actions ahead! This may be the opening of Pandora's box of Problems/Regulations for the Voluntary Benefits Plans and Markets. > Premiums are extremely high at the Expense of the Employees! > The Excessive Commissions paid to Brokers, Advisors, PEOs, Associations, and others add to the cost of the Plans at the Expense of the Employees. Some additional controls may be inevitable! It is to early to predict the outcomes for these litigious trends! At Eureka!! we'll be following the Legal Systems and Legislation. We'll continue with our scrutiny of this marketplace and penalties/regulations that may be imposed.

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Note & Food For Thought Most Employers and Employees have little or no knowledge about the Voluntary Benefits back office operations. Many Employers do know that the Voluntary Benefit Plans offer specific Risk Protections to help Employees protect themselves and their families from potential losses that the Employer's Benefit Plans does not cover. What is needed? The need is to offer Voluntary Benefit Plans at a Fair Price that Pay Justifiable Compensation to those Marketing the Plans!

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Eureka!! will be actively researching and then implementing Cost-Saving   

 Strategies/Solutions for addressing the Systemic Problems with the Voluntary Benefit Plan marketplace! As these Strategies/Solutions are developed, tested and proven, we'll include them in our 11 Component Cost-Saving Strategies/Solutions!

Please Rememder Our Goal is to Get a Greater Return on Invested Benefit Dollars for Employers & Employees!

I'd love to hear your thoughts and opinions about these new developments! Please Post or Send a Message! Let's Talk! Phil -- (Cell/Text) 216.577.5579 / phil@vestabp.com? / www.vestabp.com