Health Insurance Pressure Increases Critical Illness Demand

The out-of-pocket costs of some of the Affordable Care Act plans can exceed $6,000 a year -- far too much for someone on a limited income, experts say.

The critical illness (CI) market reported new business premium of nearly $381 million in 2014, a new study showed, as Americans search for creative insurance protection against high medical expenses.

In addition, the number of eligibility triggers for critical illness coverage rose last year to 19 from 13 in 2013, the Gen Re Critical Illness Insurance Market Survey revealed.

The survey covered 59 carriers making up 95 percent of the critical illness market. Of those 59 carriers, 41 were selling 73 different CI products and the remaining 18 carriers had not yet entered the CI market as of last year but were preparing to do so or exploring the feasibility of entering it.

Of those 18 carriers, 79 percent cited a product diversification strategy as the reason to enter the market. Another 64 percent pointed to agent demand, 57 percent said it represented a differentiation strategy, and 43 percent said it was on account of consumer demand. Finally, 29 percent pointed to demand from their marketing departments and 21 percent indicated it was due to competitive pressures.

The group and worksite segments of the CI market are expected to see the strongest growth over the next three years, said Steve Rowley, life/health senior account executive for Individual Products.

Demand for critical illness coverage has been rising as employers shift more of the burden of paying for primary medical health insurance on employees.

Carriers have raised deductibles and out-of-pocket expenses, which has made coverage more expensive for employers and employees.

With more employees covered through high-deductible plans, for which a family deductible can surpass $13,000, employees see CI coverage as a way to supplement primary medical coverage.

“The unfortunate fact is that few (if any) of us have the comprehensive, low-deductible or co-pay plans that were common even just a few years ago,” said Rowley, in an Oct. 19 blog post on CI coverage.

CI coverage supplements protection necessary to pay for catastrophic medical events like cancer, heart attacks, stroke, kidney failure and organ transplants.

Most victims will survive the setbacks, but paying for follow-up expenses is only feasible through good medical coverage — and even that may sometimes not be enough unless covered by the supplemental coverage offered by CI.

The average brand name cancer drug in the U.S. costs $10,000 a month and 11 of 12 Food and Drug Administration-approved cancer drugs cost more than $100,000 a year, according to Gen Re.

More than two-thirds of bankruptcies results from medical bills and 52 percent of all debt on credit reports is medical debt, according to Gen Re.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].