Critical Illness Coverage Fills The Gap And Eases Client Concern

By Pam Jenkins

America’s workers are concerned about health care — really concerned. In fact, a recent survey from the Employee Benefits Research Institute showed 31 percent think health care is the most critical issue in the country, far outpacing terrorism at 21 percent and nearly double the number who thought so five years ago.

Clearly, health care reform hasn’t done much to reassure us about the availability and cost of health care.

In the same study, only 1 in 3 respondents said they were very confident or extremely confident they could afford care without financial hardship. Increased spending on health care is contributing to Americans' financial fragility.

More than a third of those with higher health expenses report having difficulty paying other bills, and nearly that many have high credit card debt. And more than 1 in 4 struggles to pay for even basic necessities.

Critical Illness Magnifies The Problem

This financial difficulty is magnified when it comes to critical illnesses. The survey shows nearly a quarter of working Americans say they’re not very prepared or not at all prepared to fund out-of-pocket medical expenses for critical illnesses, and another third are only somewhat prepared.

What’s going on here? If the Affordable Care Act means everyone has health coverage, why are so many workers concerned about medical costs, especially for serious illnesses such as heart attack, stroke or cancer?

There are two main reasons. First, it’s important to realize that no health insurance plan — “Cadillac” or otherwise — covers all the medical and nonmedical costs related to a serious illness. And second, the costs of a serious illness such as heart attack, stroke or cancer can be significant.

Serious Illness = Serious Bills

Let’s start with costs. The American Heart Association reports heart attacks and coronary heart disease are two of the 10 most expensive hospital discharge diagnoses, accounting for nearly $22 billion in costs a year.

Heart attack hospitalizations cost patients a median of $53,000 and strokes cost $31,000. If bypass surgery is needed, costs can skyrocket to the $86,000-to-$178,000 range.

Add onto those bills the additional expenses following hospitalization, including rehabilitation, therapy, ongoing medical care and drugs. Many patients and their families also face significant nonmedical costs related to a serious illness, such as home adaptations or equipment, travel for treatment, and lost income from missing work.

Out-Of-Pocket Costs Pile Up

Your clients may assume the health coverage they offer their employees will cover most medical expenses. But when you do the math, it’s easy to see how quickly the dollars add up.

First, your clients are probably offering higher-deductible health plans than they did just a few years ago. That means employees are shouldering a heavier burden upfront, even before a critical illness strikes.

Then employees are likely responsible for copayments or coinsurance. Although 20 percent of the tab may not be a concern for a $100 office visit, the 20 percent share of a $100,000 hospital bill is another matter entirely.

Even plans that cap out-of-pocket costs can still leave families owing thousands of dollars. When you consider close to half of working Americans would struggle to scrape together as little as $400 in an emergency, this kind of financial burden can be devastating.

How Critical Illness Insurance Helps

Critical illness insurance can help bridge the financial gap between what health insurance covers and out-of-pocket expenses.

Industry research tells us that America’s workers are very concerned about our health care system. This concern springs from rising costs as well as access to quality care.

The good news is that many of us feel positive about the health plan provided by our employer, and many employers still see this as a way to attract and retain valuable talent. However, rising costs for both employees and employers have become the new reality.

Meanwhile, employers are looking for more creative ways to help employees deal with the financial impacts of an illness or accident by providing access to voluntary plans, like critical illness, that provide cash payments to the insured to use for whatever expenses are most pressing at that time.

Critical illness insurance complements major medical insurance by paying a lump sum — typically $5,000 to $100,000 depending on the plan — when the illness is first diagnosed.

Covered illnesses usually include heart attack, stroke, end-stage renal failure, coronary artery disease requiring bypass surgery, major organ failure and sometimes cancer.

Benefits are paid directly to the insured to use however they are needed: for hospital or doctor’s bills, copayments and deductibles, or even daily living expenses such as mortgage payments, utility bills, food and child care. The coverage doesn’t coordinate with other insurance, so the benefit amount isn’t reduced by what major medical or other coverage pays.

Insureds don’t even have to get sick to take advantage of their critical illness insurance. Many plans include a wellness benefit that pays a set amount — $50 to $150 is typical — for covered health screenings such as mammograms, colonoscopies or X-rays. These tests can help in early detection to prevent more serious illnesses from developing.

Who Needs Critical Illness Insurance?

Unfortunately, serious illnesses are far from rare. Every 42 seconds, someone in the U.S. has a heart attack. For about 660,000 of those heart attack sufferers each year, it’s a first occurrence.

Cancer cases also are on the rise, with about 1.7 million new cases diagnosed every year.
The good news is more people are now surviving diagnoses that were once considered death sentences.

More than 80 percent of those who have a stroke survive it. And death rates are declining for all four of the most common cancer types: lung, colorectal, breast and prostate.

However, surviving the illness and surviving the financial burden are different matters. Critical illness insurance is an affordable option to help your clients’ employees better protect their families, their finances and their futures. If critical illness insurance isn’t in the portfolio of solutions you’re offering your clients, it’s time to consider adding it.

Pam Jenkins is assistant vice president for product development at Colonial Life & Accident. Pam can be contacted at [email protected].