News

–By Lee M Hauser, Vice President – Worksite Benefits, Gregory & Appel

Several years ago, WCA Services Inc. partnered with Boston Mutual Life Insurance Company to provide disability, accident, critical illness and life insurance with the catastrophic loss rider. To date, over 30 counties have taken advantage of the guaranteed permanent life insurance program.
With the increased cost of health care and reduction in benefits, the critical illness insurance program is becoming more popular. Boston Mutual’s critical illness insurance program has proven to be a superior product in the marketplace.

THE RIGHT TIME FOR CRITICAL ILLNESS INSURANCE
For a growing number of Americans, employer-provided health care insurance benefits are shrinking. Even as benefits shrink, an employee’s percentage of the premium cost is growing. When an employee or family member requires health care, they discover their out-of-pocket costs are increasing as well. Employees are becoming accustomed to the “co-pay creep.” But as their share of the costs grow, even employees with good health care coverage are becoming concerned. How can they keep a health crisis from becoming a financial crisis?

The total employee share of health care costs, including premiums and out-of-pocket costs, has climbed to almost 37% in 2013 according to a recent survey by benefits consultant Towers Watson and the National Business Group on Health, a membership group that advises large employers on benefits.

Over the next few years, health care costs are expect to increase faster than inflation. From 2011 to 2020, health care expenditures are projected to grow at an annual rate of 5.3%, outpacing expected inflation of 2.1%.

About half of U.S. households have savings of less than $10,000, according to The Prudential Insurance Co. An analysis by Sun Life Financial of its insurance claims data reported the average out-of-pocket medical cost for critical illnesses is $7,575, for heart attacks an average of $14,234. About 60% of all U.S. bankruptcies stem from medical costs, and that number includes people with health insurance.

Many households lack the funds needed to accommodate these costs, especially when faced with a critical illness. While many employees may be covered by disability insurance, the benefit received is often a portion of the employee’s income. As they cope with health related issues a lower monthly income combined with higher expenses can compromise a family’s quality of life.

EMPLOYEES – HELPING FILL THE GAP
Critical illness insurance can be a solid solution. It helps provide financial protection against direct and indirect out-of-pocket costs associated with a specified critical illness. It is not a substitute for medical or disability insurance, but it can help cover expenses like deductibles and co-pays.
Commonly, a critical illness policy will pay a lump sum benefit from $5,000 to $50,000, depending on the benefit amount purchased by the employee. Many critical illness policies pay this benefit upon diagnosis of a heart attack, stroke, cancer, or renal failure. Some policies also cover additional critical illnesses and may even offer coverage for childhood conditions like cleft palate or Downs Syndrome. An annual cash benefit can be offered for simply having a specified health screening each year.
Critical illness insurance provides an employee choice in a health care crisis. The cash benefit can be used however they choose, to cover deductibles, co-pays, obtain a second opinion, or take advantage of an otherwise uncovered specific critical illness. The benefit helps fill the gap.

ADVANTAGES FOR EMPLOYER
Employers strive to offer robust benefit packages to attract and retain employees. At the same time they need to control their benefit costs. When employers need to shift more of the health benefit costs to their employees, employers remain concerned about their employee’s financial well-being. How will their employees cover expenses related to a critical illness?

Employers realize financial distress can have a negative impact on an employee’s productivity. Helping employees improve their financial wellness can also help employers maintain productivity levels in the workplace. A critical illness policy provides employees an option for covering their own risk.

The employer’s additional administrative burden is minimal. For example, the carrier generally administers critical illness claims so no additional administrative burden is added to an already overstretched administrative staff.

CONCLUSION
Critical illness insurance can compliment an employer’s medical insurance with minimal administrative costs. It offers a financial protection benefit to employees. At a time when employees are more and more accountable for their own expenses, it is important they also have insurance protection options that help cover their risk and supports their choices. Critical illness insurance can be a solution.