Critical Illness Insurance Helps Fill the Gaps, Regardless of Health Plan
Clearing up the misconception that CII isn’t needed with low health deductibles
The first critical illness insurance (CII) product was issued in 1983. It wasn’t the brainchild of some actuary, marketing representative or insurance industry think tank. Instead, it was Dr. Marius Barnard, who along with his brother Dr. Christiaan Barnard, performed the world’s first successful heart transplants.
Barnard witnessed the destructive financial impact of critical illness on his patients. He saw the adverse affect on recovery when they had to work full time while undergoing treatments. He believed advances in medicine could only be meaningful if patients could cure the financial ailments that accompanied their critical illness.
The CII product has evolved, matured and been sold in more than 50 countries since 1983, and it remains as important as ever—perhaps more so, given that today’s healthcare consumers are responsible for an increasingly larger share of medical costs.
Still, employees enrolled in group medical plans often believe the financial risks from critical illnesses are sufficiently covered by health plans and other insurances they carry. Many who experience a critical illness, however, find that their existing policies leave them with surprising out-of-pocket gaps to fill and lost income to replace.
Similarly, many benefits brokers believe that if a customer has a low or no deductible on their health plan, they don’t need CII. In fact, many critical illness-related expenses may not be covered by medical insurance, such as lost wages, home healthcare, travel or experimental treatments.
Having a CII policy in addition to medical insurance gives employees fuller coverage that helps protect them in case of a critical illness and helps them cover the costs of all the “other expenses.”
This critical illness only insurance policy provides limited benefits. This limited policy has some specific benefit limits and is not a medical insurance policy, a Medicare Supplement policy, or a high deductible health plan. Please refer to the issued insurance policy for complete details and all benefit requirements, including all limitations, exclusions, restrictions and reductions. We reserve the right to cancel the policy with advance written notice to the policyholder. Insurance policies and certain policy benefits are subject to state variations and may not be available in all states. Issued insurance contracts determine all plan features and benefits.
Assurant Employee Benefits is the brand name for insurance products underwritten by Union Security Insurance Company.
Benefits provided and premium amounts depend upon the plan selected. Contact us for costs and complete details.
Deductibles Don’t Tell the Whole Story
When it comes to a critical illness, an afflicted person with a high deductible health plan (HDHP) will be on the hook for more out-of-pocket costs up front before insurance kicks in, anywhere from one to several thousand dollars. Naturally, benefits brokers target their CII offerings to the increasingly large share of the population enrolled in HDHP’s.
While significant, deductibles, copays and coinsurance are only a portion of the expenses an insured will incur due to critical illness. Which is why marketing CII to groups with traditional low-deductible plans can make just as much sense as offering it to those in HDHP’s.
Consider a 2013 Kaiser Foundation survey(1) that found 33 percent of all medical plans’ participants—including nearly a quarter of those in HMO’s—have aggregate out-of-pocket family maximums of $7,000 or more.
The figures below illustrate the real financial impact of having a critical illness:
- According to the American Cancer Society Action Network, the estimated out-of-pocket costs for a patient who suffers a heart attack are $5,000 to more than $8,000 over the expected year of treatment(2).
- A recent Duke University Medical Center/Dana-Farber Cancer study found their self reported out-of-pocket cancer-related costs averaged $712 per month.(3)
- Employees will pay an average of $2,487 in out-of-pocket costs in 2015. That’s nearly double what employees paid in 2009, when those costs amounted to $1,276.(4)
Again, these dollar figures reflect only plan-related expenses such as deductibles, coinsurance and copayments, and don’t take into account things like:
- Transportation to and from treatment centers, plus lodging if necessary
- Home health care
- Experimental treatments and other non-covered care
- Income disruption to household members that take on caregiver duties
Few Americans fully understand the full personal financial impact of a critical illness, but their employer’s benefits broker definitely should.
A Shot in the Arm for Financial Recovery
Many employees lack the financial wherewithal to deal with the required outlays associated with critical illness. The statistics are telling, and chilling:
- A recent Employee Benefits Research Institute survey5 found that nearly 60 percent of employees and/or their spouses have less than $25,000 in total savings and investments (excluding their home and defined benefit plans).
- 38 million American families are living paycheck to paycheck.(6)
- According to a 2013 study by NerdWallet Health, unpaid medical bills are expected to be the No. 1 cause of bankruptcy filings, surpassing both credit card and mortgage debt.(7)
Employees may carry disability insurance but that benefit is usually only a percentage of the employee’s income and waiting periods may be 30 days or longer. Plus, depending on a disability plan’s definition, a critically ill patient may not qualify for any benefits if they can still perform their job.
All this serves to underscore the need for supplemental coverage in the form of critical illness insurance.
Unlike most other health insurance products, it does not pay based on a percentage of income, as a reimbursement of actual expenses, or even based on a menu of scheduled benefits. Rather, it’s a simple “if-then” formula. If a trigger condition occurs while the person is insured, then the benefit amount selected by the insured will typically be paid.
The insured is free to use the money in any way they feel appropriate, such as:
- Supplementing their health plan
- Paying deductibles and coinsurance or prescription copays
- Paying for out-of-network provider costs
- Traveling to desired doctors and facilities
- Paying for treatments their health plan may not cover
CII can give patients a greater degree of choice and treatment options than they may otherwise have. Of course, the lump sum payment can go toward non-medical expenses, such as mortgage and other bills, childcare, and everything else than can be difficult to fund with ongoing medical expenses and/or lost income.
Additionally, an employee may have the option to cover their dependents under their CII policy. This would allow them to receive a lump sum payment to help take care of their loved one if they need to take time off work. Not all insurance coverages allow for dependent coverage so this is a key aspect of CII.
An often-overlooked benefit to CII plans is how they can provide benefits to help prevent a critical illness. Plans typically cover one or more wellness screenings each year and a number of common tests, including:
- Blood test for lipids including total
- cholesterol, LDL, HDL and triglycerides
- Breast ultrasound or mammography
- Chest x-ray
- Pap smear
- PSA (blood test for prostate cancer)
- Electrocardiogram (EKG)
- Echocardiogram (Echo)
Employee Benefit, Employer Value
Critical illness insurance can help be a financial life-saver for employees, which in turn is good for employers. In addition to helping employees address their personal financial challenges, CII is an effective way to help companies solve their own business challenges.
It’s no secret that employees’ personal lives influence their work lives and workplaces. Life stress can translate into suboptimal performance at work, and financial problems are frequent causes. In a recent PriceWaterhouseCoopers study(8), 24 percent of employees reported personal financial issues being a distraction at work.
Providing critical illness insurance as a voluntary group benefit helps address many of these challenges. For an employee, CII can help reduce financial exposure to healthcare-related expenses with an affordable, easy-to-understand benefit. From an employer standpoint, Critical illness coverage can help enhance employees’ financial wellness through flexible plan and benefit designs at little to no cost to the company.
CII is a natural, easily integrated complement to group health and disability, and a valuable component in a complete, competitive benefits package. For employees, that package may look a lot different than it did five, 10 or 20 years ago, but one thing never seems to change.
Generally, employees who are happy with their benefits are more satisfied with their jobs and loyal to their employer, and more likely to recommend them as a great place to work.
CII provides the insured with an unrestricted lump sum benefit upon diagnosis of a covered condition or event such as cancer, heart attack, stroke, kidney failure and major organ failure, from $5,000, $10,000 to $50,000 or more.
The number of U.S. employers offering CII plans has grown at a modest rate (11 percentage points from 2002 to 2013, according to LIMRA), yet several factors suggest adoption will accelerate—or has already. With today’s prevalence of consumer-driven health plans, employees are increasingly concerned about healthcare costs, and they appear to be becoming more aware of their financial exposure.
Gen Re’s 2013/2014 U.S. Critical Illness Insurance Market Survey provides insight into the current CII market. In it, 50 companies (32 of whom market at least one type of CII) reported on 63 products currently being marketed and another seven that were in development. Participants reported $304 million in new premium, a 17 percent increase over the previous year’s survey for companies participating in both years. When asked about future growth expectations, respondents said they anticipate average annual growth rates of 14% (Worksite) and 15% (True Group), over the next three years.
In a recent study(9), when asked which voluntary benefits were expected to increase in adoption,
41 percent of brokers said CII, higher than any other voluntary product.
Combined, the trends in health plans and growing awareness of the product should lead to increased adoption of critical illness insurance as a core voluntary group benefit.
Perhaps no other product can close the coverage gaps and help prevent or mitigate the financial risks that a heart attack, stroke, cancer or other life-changing diagnosis can bring, regardless of health plan or the size of the deductible.
(1)Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2013.
(2)American Cancer Society Cancer Action Network (ACS CAN). Accessed 02/2015.
(3)Duke University Medical Center and Dana-Farber Cancer Institute; study presented at the
annual meeting of the American Society of Clinical Oncology. Accessed 02/2015.
(4)CNN Money. Accessed 02/2015. money.cnn .com/2014/11/13/pf/health-care-insurancepremium-
(5)2013 Retirement Confidence Survey, Employee Benefit Research Institute and Mathew
Greenwald & Associates.
(6)CNN Money. Accessed 02/2015. money.cnn .com/2014/04/25/news/economy/middleclass-
(7)FoxBusiness. Accessed 02/2015. foxbusiness .com/personal-finance/2014/02/18/
(8)PwC Employee Financial Wellness Survey 2014 Results.
(9)Prudential. The State of Group Voluntary Benefits, 2013.
Source: Whitepaper by Assurant and copywrite ©Assurant 2015 KC4983 (02/2015)
Redistributed by: Critical Illness Resource Center Criticalillnesspolicies.com