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The Rough Notes Company Inc.



October 03
09:48 2018


Employers and insurers stepping up to help employees deal with a dreaded diagnosis

When people learn they have cancer, they don’t want to burden themselves and their loved ones with concerns about how they will get by financially while they undergo the grueling course of treatment. If the patient and his or her employer have had the foresight to acquire special insurance for cancer and/or other critical illnesses, that financial burden will be substantially reduced.

Although most Americans have private or public health insurance to fund treatment, cancer and critical illness coverage provides immediate compensation that can be used at the discretion of the policyholder, according to Wendy Herndon, second vice president of product development and implementation at Aflac, a leader in supplemental health insurance products.

“Aflac’s cancer policy is individually issued to and owned by the policyholder,” she says. “Consumers don’t have to wait on their primary [health insurance] coverage to start leveraging their cancer insurance benefits.

“Unless the policyholder assigns the benefits to a provider, the policy pays benefits directly to the policyholder,” Herndon adds. “Policyholders can use their benefits to help pay medical costs or for everyday living expenses.”


The attractiveness of user-directed proceeds is a major factor that is driving growth in sales of critical illness insurance products.

According to LIMRA, a research trade association for the financial services industry, the number of Americans purchasing supplemental health-related policies increased 16% in 2017. Total new annualized premium was $2.6 billion for accident, critical illness, cancer, hospital indemnity and other supplemental health insurance products in 2017, an 8% increase over the previous year.

Cancer and heart disease are not the death sentences they once were, and benefits are needed for those who are living with those conditions.”

—Keith Brandstedter
Glatfelter Specialty Benefits

“The outlook for critical illness products over the next few years is good,” states one LIMRA report. “Sales continue to increase, not just from new entrants, but also from growth experienced by established carriers.

“The challenge will be to persuade consumers to look beyond their health coverage to supplemental products,” the report adds. “As more competitors enter the market and the product becomes more mature, the challenge will be for carriers to differentiate themselves and manage profitability. Product design for many of the products on the market is already fairly complex.”

Most critical illness policies are marketed through employers, with premiums paid on a voluntary basis (with the employee paying all), a contributory basis (employee and employer each paying a percentage), or a non-contributory basis (employer pays all).

Critical illness products provide coverage for up to 13 conditions, according to LIMRA. Virtually all critical illness policies cover cancer, but most have an option to exclude cancer coverage, thus allowing individuals with an uninsurably high risk of cancer to purchase coverage for other conditions.

Cancer options

Aflac offers products for a range of critical illnesses, says Herndon, but she adds that “when it comes to cancer, we strongly believe a stand-alone cancer product with additional benefits for treatment and recovery provides more ongoing support throughout the policyholder’s diagnosis.”

Herndon describes two kinds of cancer policy options:

  • A lump-sum policy, which pays most of its benefit as a single lump sum after a diagnosis of internal cancer and may provide some smaller payments for hospitalization and treatment costs; and
  • An indemnity-based policy, which usually pays an initial benefit upon diagnosis, then other specified amounts triggered by particular treatments, such as chemotherapy.

“A typical lump-sum critical illness policy will pay a fairly large initial diagnosis benefit, typically from $5,000 to $50,000,” Herndon says. “It may also contain benefits for a recurrence or subsequent event at a lower dollar amount, plus optional riders to provide some benefits for hospital and treatment costs.”

Herndon cautions agents and brokers who are helping clients apply for cancer or critical illness coverage to watch for any deductibles or co-payments (Aflac has neither), as well as lifetime coverage maximums.

LIMRA researchers note that policies provided through employers are increasingly available on a guaranteed issue basis, meaning that no eligible applicant will be denied. Given that restriction on underwriting discretion, LIMRA finds that some carriers are lowering their lifetime maximums for workplace products. Still, more than half of carriers provide a full recurrence benefit for a specific condition or a similar condition within the same disease category.

In contrast, people who apply individually for critical illness coverage can be turned down; but if accepted, they often can purchase higher benefit limits than are available for guaranteed issue policies.

Mandatory availability?

As stated above, cancer and critical illness insurance are marketed principally through employers, and sales could grow exponentially if employers were required to make it available, even on a completely voluntary, employee-paid basis.

Significant steps in that direction have been taken in Georgia and New York, which recently enacted laws mandating that fire departments, fire companies, and fire districts provide cancer coverage to their firefighters. The Georgia mandate took effect on January 1 of this year and applies to all firefighters, whether volunteer or professional. The New York law will take effect on January 1, 2019, and applies only to certain volunteer firefighters.

Firefighters are up to twice as likely to contract certain cancers as are members of the general public, says Keith Brandstedter, president of Glatfelter Specialty Benefits, which develops benefit programs for fire departments and other occupational classes.

“The reason,” he says, “is that firefighters are going into burning buildings, and today’s structures and furnishings are composed of plastics, resins, and synthetic materials that contain many carcinogens that can be inhaled or absorbed into the body.”

According to Brandstedter, it is impossible for firefighters to seal off every part of their bodies from the carcinogens that have been let loose by a fire. Citing a study by the Firefighter Cancer Support Network, he says that “for every 5% increase in skin temperature, there is a 400% increase in absorption of substances through the skin.”

Glatfelter offers a critical illness program for firefighters that provides coverage after a heart attack, stroke, kidney failure, and other afflictions, in addition to a cancer diagnosis.

Brandstedter explains that the policy applies outside the workers compensation system, so claimants can collect on their policies at the time of diagnosis without having to establish a connection between their condition and their work as firefighters.

The coverage also applies outside of medical insurance, he adds. “A claimant can get a lump-sum benefit at the time of diagnosis and use it to pay [health insurance] deductibles, expenses for traveling to treatment, or any other personal expenses. The claimant can use the benefit for any purpose.

“This coverage is not meant to pay for traditional hospitalization,” he says. “It’s gap coverage to let the claimant concentrate on fighting the disease.”

Coverage to keep policyholders in that fight is ever more welcome today, he says, because “cancer and heart disease are not the death sentences they once were, and benefits are needed for those who are living with those conditions.”

For more information:


Glatfelter Specialty Benefits

The author

Joseph S. Harrington, CPCU, is an independent business writer specializing in property and casualty insurance coverages and operations. For 21 years, Joe was communications director for the American Association of Insurance Services (AAIS), a P-C advisory organization. Prior to that, he worked in journalism and as a reporter and editor in financial services.

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