When a client that was switching to a high-deductible health plan asked The Farmington Company, a voluntary benefits communication and administration firm, to do a benefit meeting to boost employee participation, Farmington recommended they include voluntary critical illness as a benefit.
Adding CI "to help allay some of the fears for those worried about the big stuff" resulted in a nearly 300% increase in participation rates, says Doug Mantz, VP of sales.
With cancer, heart attack and stroke making up the top three critical illnesses, it used to be that CI plans only covered these conditions. They also got a bad rap, says Rob Shestack, SVP, voluntary benefits national practice leader, AmWINS Group Benefits, because many thought such insurance was unnecessary. "But that was when ... medical insurance was basically $2 copays. No out of pocket. It was fairly reasonable," he says.
Now, around 60% of all bankruptcies are due to medical-related expenses - and most of those declaring bankruptcy had major medical coverage, Shestack says.
"A lot of folks market critical illness as a health care complement - and it is - but it also needs to be marketed as a financial protection benefit as well," says Shestack, adding that the average bankruptcy is around $8,000 ($15,000 if cancer-related), while the average CI payout is $17,000.
Most carriers now cover nine to 15 conditions with lump-sum payments that make communications easier and more effective for the consumer, says Joan L. Price, senior product specialist, Colonial Life.
"It gives the consumer more freedom in using that benefit," she says. Like Mantz, Price is also seeing a lot of plans paired with a high deductible health plan For those that include a health savings account component, "We make a very concerted effort to offer products that are [compliant]" with HSAs, she says, adding that product sales are up double digits industry wide.
Originally a staple of the worksite market, traditional group carriers are joining the CI business at a steady rate. The result is product changes that are beneficial to the consumer, says Mantz. "We're seeing rates go down a little bit or features and benefits increase for the same cost," he says.
Colonial Life is also competing with formerly group-only carriers that are developing their own CI products - at least five new ones in 2012 alone, says Price.
Expected features now include simplified underwriting with guaranteed issue, flexibility in plan design, and no one-size-fits-all approach, she adds.
Of all voluntary benefits in the last decade, CI "is the No. 1 product that carriers look at trying to enhance year after year to get a leg up on their competition," says Shestack.
For those brokers who may not have paid attention to CI in the past, ignoring it and the voluntary marketplace as a whole would be a big mistake, says William Kramer, SVP and head of sales for AlwaysCare Benefits.
"Because of health care reform and medical loss ratio issues, brokers know they're going to lose revenue, they're going to lose commissions," says Kramer. "Voluntary benefits like critical illness are what's going to help back fill that revenue loss to brokers."
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