CRITICAL ILLNESS: MORE VALUABLE THAN EVER
Because when “life takes an unexpected turn, your focus should be on recovery, not paying the bills”
By Len Strazewski
COVID-19 vaccines have finally arrived, but don’t expect the pandemic to be over soon. The coronavirus will still be creating critical illnesses for many months, and suddenly everyone understands that critical illness insurance is more valuable than ever.
In the past year, as thousands of victims crowded hospitals, insurers have been overhauling critical illness insurance, increasing benefits, creating more flexibility and building better compatibility with its supplemental benefit cousins: life insurance, hospital indemnity insurance, accident insurance and disability insurance.
Supplemental voluntary benefits are usually sold to employees at the worksite and paid through payroll deductions. Employers have also been reviewing their employee benefits programs and revising the range of supplemental health benefits available to their workers, says Wendy Herndon, second vice president of product launch and adoption at Aflac.
“We are always looking to review our coverage and make it more relevant,” she says. “And critical illness insurance plans are an important part of helping people pay their medical bills that are not covered by major medical health insurance.”
Herndon says critical illness insurance sales were up about 14%, according to LIMRA market reports, and other supplemental benefits up about 7%, indicating a growing interest among employees to buy additional protection.
“The pandemic has been kind of a wake-up call for employers and their employees, and for insurers there has been a call to research to look at the best ways to supplement employer-paid health benefits,” she says.
The Columbus, Georgia, insurer’s own research, the 2020-2021 WorkForces Report, polls 1,200 employers and 2,000 employees in various industry segments. The survey says that about 50% of employers believe supplemental insurance improves recruitment and 60%say the coverage improves retention.
Herndon says there is an important message for producers in the statistics: Supplemental benefits are a powerful way for agents and brokers to promote themselves and their other coverages. She cites a commonly noted statistic that 48% of the population are unable to pay $1,000 for out-of-pocket expenses.
“In 2020, the pandemic made it real for people. How am I going to protect my family from the coronavirus? How do I protect my employees from the costs of care during the pandemic?” she says.
“Companies in the industry have been asking themselves ‘what can I do to make this coverage relevant?’ and looking for ways to modify their products to meet the needs of employees.”
The result has been an evolution of supplemental benefits, particularly critical illness insurance. Once limited to heart attack, cancer and stroke, Aflac’s critical illness coverage has become more flexible and less focused on simply a lump-sum payout and more on payments that support wellness and recovery. But the coverage has become complicated. Coverage can be marketed on a group and individual basis and riders can provide coverage for Alzheimer’s, ALS and other illnesses, including COVID-19.
48% of the population are unable to pay $I,000 for out-of-pocket expenses.
Herndon advises that agents and brokers begin client education as early as possible by making use of virtual benefits communications to explain choices and how the choices can meet the various needs of individuals, and also by using telephone and video communications to meet with prospective policyholders due to the pandemic restrictions of personal contact.
“Each employee is unique,” Herndon says. “What is the need of the customer? Sometimes the best approach is not a single product but a combination of supplemental products such as accident and short-term disability or hospital indemnity.”
Laura Bongiorno, voluntary benefits practice lead for Group Benefits at The Hartford, says that the pandemic heightened awareness of supplemental health products and gave them all a new sense of relevance. Interest in supplemental products is on the rise, and The Hartford is creating new options to include COVID-19 treatment expenses and related costs.
“With the pandemic, the industry began to rethink the needs of a workforce and modify products to meet those needs,” she says. COVID-19 has raised the consciousness of both employers and employees about their potential coverage needs and how that coverage should be designed. Coverage combinations are more popular as agents and brokers search for ways that their clients can fund treatment-related costs as well as periods of disability during the pandemic.
The Hartford’s 2020 Future of Benefits study reflected the growth of interest in critical illness insurance during the pandemic. The study notes that the pandemic has elevated the focus on voluntary benefits. This suite of products and solutions can help people plan for unexpected life events and provide financial protection, including critical illness.
The study was conducted as an online survey fielded in two waves. The first wave was from February 27 to March 13, 2020, just before the pandemic escalated in the United States, and included 761 employers and 1,503 employees. The second wave was fielded from June 15 to June 30, 2020 and included 567 employers and 1,038 employees.
The study found that 27% of U.S. workers said in June that they would consider purchasing critical illness insurance during their next open enrollment because of COVID-19; the list of benefits considered included: additional life (40%), short-term disability insurance (30%), long-term disability insurance (29%), critical illness insurance (27%) and hospital indemnity insurance (23%).
The study also indicated an increased interest in offering critical illness insurance from employers that don’t currently offer the benefit. In March, 36% of employers said they were likely to offer critical illness insurance in the future. This number jumped to 50% in June.
Until the pandemic, the most common role for critical illness insurance and other voluntary benefits was filling in the gaps of high-deductible health plans, paying the deductibles, and covering incidental expenses with a lump sum, Bongiorno explains. But when the pandemic hit, the complex medical issues of COVID-19 as an infectious disease came to the forefront.
Insurers could cover COVID-19 as an additional disease, but the complexity of the disease involves long hospitalizations, disability and, in the worst cases, eventual death.
The Hartford’s critical illness policy, designed as a supplemental employer-sponsored program, has evolved into a broad-based medical supplement product that covers expenses for 34 medical issues, including the usual cancer and related expenses and vascular diseases such as heart attack, transplant, stroke and coronary bypass. The policy also covers end-stage renal disease, major organ transplant and bone marrow transplant.
In March, 36% of employers said they were likely to offer critical illness insurance in the future. This number jumped to 50% in June.
The product has also become more flexible, the company notes. Employees can access a standard plan, which includes a choice of coverage amounts, each with benefit amounts of up to 100% of the coverage amount for covered illnesses and the option to custom-build a critical illness, for the following: neurological disease benefits, child-specified benefits, transitional care benefits, travel benefits, health screenings, occupational HIV and hepatitis benefits.
Behavioral health issues also fit in the voluntary benefits environment, Bongiorno says. “Everyone is trying to figure out how to underwrite behavior-al health issues and I think everyone realizes the importance of covering mental health conditions, anxiety and substance misuse,” she says.
The Hartford product also includes Ability Assist®, confidential support for emotional, legal and financial issues related to critical illness and HealthChampionSM, assistance for medical care and claims.
Pam Jenkins, assistant vice president for product development at Colonial Life Insurance Company, agrees that most insurers in the critical illness market have been working to enhance coverage. Colonial Life specializes in small to medium-sized groups of about 100 people.
The pandemic created new needs for a wider range of coverage and led to expanding the number of illnesses covered by critical illness insurance. News media reports about COVID-19 patients focus on the mortality rates, she says, but for many the next biggest risk is losing their life savings through extended disability, loss of employment and extended hospitalizations.
“Medical advances mean many more people are surviving serious illness, but surviving the financial burden they create is a different matter,” Jenkins notes. “Critical illness insurance is an affordable option that can help employees better protect their families, their finances and their futures.”
In August, the company announced a new version of its critical illness policy, designed to fill in coverage gaps as well as expand coverage. The new group critical illness plan includes an optional rider that offers a lump-sum benefit for hospitalization for treatment of COVID-19 and more than a dozen other infectious diseases such as antibiotic-resistant bacteria, Legionnaires’ disease, meningitis, Lyme disease and sepsis.
The company’s new group critical illness plan offers coverage for up to 56 different serious conditions and treatment procedures, including heart attack, stroke, cancer, organ failure or coronary artery bypass graft surgery.
Additional conditions covered for children at no additional cost include Down syndrome, cystic fibrosis, cerebral palsy, spina bifida and cleft lip or palate. Employees can also personalize their coverage with riders that provide additional benefits for infectious diseases, cancer, first diagnosis, heart procedures, and progressive diseases such as Alzheimer’s disease.
“When life takes an unexpected turn, your focus should be on recovery, not paying the bills,” says Jenkins.
Colonial Life has also expanded its benefits communications to support agents and brokers as well as group policyholders, Jenkins says. The company can also manage the payroll deduction and enrollment process and does not charge employers for the service.
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Len Strazewski is a Chicago-based writer, editor and educator specializing in marketing, management and technology topics. In addition to contributing to Rough Notes, he has written on insurance for Business Insurance, Risk & Insurance, the Chicago Tribune and Human Resource Executive, among other publications.