By Cyril Tuohy
Critical illness and chronic care riders tacked on to all manner of life, long-term care and medical stop-loss policies are spreading far and wide into the life insurance industry.
In late January, New York Life introduced a chronic care rider to newly issued standard and custom whole life insurance policies.
The move followed Pruco Life Insurance Co., the subsidiary of Prudential Financial, which announced it would introduce a universal life benefit rider to advance the death benefit to pay for a chronic or terminal illness.
In December, American General Life added a chronic illness rider to its guaranteed universal life policy known as AG Secure Lifetime GUL II.
Last September, Sun Life Financial launched a stop-loss cancer rider to protect self-insured employers against the cost of paying for expensive cancer-related illness claims.
Three months prior, Aflac pushed further into the voluntary benefits market with the launch of cancer care coverage in New York and New Jersey.
From whole life to universal life, from medical stop-loss to long-term care polices, insurance carriers of all stripes have seen fit to bolt on critical and chronic illness care riders, not unlike after-market options on cars.
Certainly, insurance carriers see the critical illness and chronic care riders as a major opportunity to sell more life and long-term care coverage at a time when life insurance sales are flat and low interest rates exert a damper on insurance products.
Living benefit riders offer policyholders more flexibility and, as some insurance insiders dryly note, these rider-enhanced products deliver benefits to policyholders who don’t have to die before gaining access to the benefits.
“This new accelerated benefit rider can turn AG Secure Lifetime GUL II into life insurance the client doesn’t have to die to use,” Jay Drucker, vice president of product management with American General, said when the company announced its Accelerated Access Solution rider on the AG Secure Lifetime GUL II.
So, yes, the industry wants to grow by selling more of what it makes.
But there’s no denying the rising cost trends of chronic illness and cancer care, and that insurance is really the only way for most people to pay for the astronomical costs of some treatments.
Except for the ultrarich like Warren Buffet or Bill Gates, no can afford to pay for critical illness care without insurance. The need for coverage is only going to grow as more people live longer with medical conditions that years ago would have cut their lives short.
The latest report on the State of Cancer Care in America by the American Society of Clinical Oncology offers a glimpse of how expensive cancer treatment has become.
Prices for cancer-fighting drugs alone can cost anywhere from $13 to $40,000 a month, according to a fact sheet on Memorial Sloan Kettering Cancer Center’s website. And that doesn’t include the cost of hospital visits and scans.
By 2030, the number of new cancer cases in the U.S. will increase by 45 percent, according to the State of Cancer Care report, and cancer will be the nation’s leading cause of death, due largely to the aging of the population.
In 2013, there were about 1.6 million new cancer cases are expected to be diagnosed in the U.S., according to the American Cancer Society. At the same time, the number of cancer survivors, measuring 13.7 million, will continue to grow.
“Many of these individuals will require significant, ongoing care,” the report said.
Costs are rising throughout the health care system, but the trend is “especially pronounced” in cancer care. Annual costs for cancer care are projected to rise to more than $173 billion in 2010, an increase of 66 percent from the $104 billion spent in 2006, the report said.
As the nation ages, and the aged live longer, the cost of treating chronic conditions such as diabetes, high blood pressure, stroke, heart disease, pulmonary conditions and mental illness will be more expensive than treating cancer — if that’s even possible.
Costs associated with treating diabetes have already surpassed the costs of treating cancer, according to research by the American Diabetes Association (ADA).
In 2012, the total estimated costs of diagnosed diabetes shot up to $245 billion from $174 billion five years earlier, according to the American Diabetes Association.
People with diagnosed diabetes incur average medical costs of about $13,700 per year, of which about $7,900 is attributed to diabetes, the ADA said.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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