How Group Critical Illness and Accident Plans Supplement Medical Benefits

As our population ages, more and more Americans are diagnosed with a critical illness. Each year, approximately 1.4 million Americans are diagnosed with cancer, 785,000 Americans experience a first heart attack, and 600,000 Americans experience their first stroke.

However, thanks to advances in medical technology, pharmaceuticals and care research over the last twenty years, the vast majority will survive these episodes. Yet the financial consequence of surviving a critical illness is something for which few people are prepared. Most health insurance policies come with co-pays and deductibles as high as $5,000 a year. Prescription drugs are not just costly, they are rarely fully covered.

With employers continually seeking affordable ways to provide better health insurance, Critical Illness and Accident insurance plans offer an extra layer of financial security without increasing overhead costs. Perhaps even more importantly, these ancillary plans can help protect workers from catastrophic medical expenses associated with a serious illness or sudden injury. These two types of plans complement standard medical and disability insurance offerings by paying out a lump-sum cash benefit on top of claims paid by other policies.

Critical Illness and Accident insurance policies may be offered as either voluntary or employer-contributory or paid benefits. Volunteer benefits are fully paid by workers or the employer can contribute up to 49 percent of the premium. Employer-contributory/paid ancillary benefits mean the company pays 50 to 100 percent of the cost.

Critical Illness Insurance
Here are some startling statistics from a current study that help make the case for critical illness insurance:

• 1.5 million Americans file for bankruptcy every year
• 97 percent of bankruptcy filings are made by individuals, not businesses
• 62 percent of personal bankruptcies in the US are the result of medical expenses
• 72 percent of those who filed for bankruptcy due to medical expenses had health insurance
• The average out-of-pocket cost was $17,749 for all medically- bankrupt families

As you might imagine, people don't go bankrupt paying for garden variety visits to the doctor's office for flu shots, broken bones, or even chronic asthma. Most folks who experience significant financial losses suffer from severe medical conditions, such as cancer, heart attack, or stroke.

This is where critical illness insurance can help. When a covered individual is diagnosed with a specified critical illness, the insurance policy pays him a lump-sum cash benefit to use as he needs. This money can help defray the cost of, say, a triple bypass surgery for which the patient is responsible for coinsurance – which could run into tens of thousands of dollars.

However, the critical illness benefit is available for whatever the insured worker needs – whether paying for childcare expenses while a stay-home parent receives medical care, covering insurance-related expenses such as copays and deductibles, or even keeping the household running by paying the mortgage, utilities, and groceries.

Policy Detail
Critical illness insurance was first introduced in the late 1990s, which coincided with the growing increase in healthcare expenses. The payout is issued as a tax-free lump-sum and typically ranges anywhere from $10,000 to as much as $1 million. Today, more than 600,000 Americans own a critical insurance policy purchased on an individual basis or through their employer.

While there are several primary illnesses covered by most policies (e.g., cancer, heart attack, stroke), each issuer determines additional conditions for which a benefit is provided. For example:

• Major organ transplant
• Coronary bypass surgery
• Coronary artery bypass graft (CABG)
• Arteriosclerosis
• Angioplasty
• Kidney (Renal) failure
• Paralysis
• Parkinson's
• Alzheimer's
• MS
• ALS
• Severe burns

A critical insurance policy may offer an additional lump-sum payment for a reoccurring critical illness, such as a second heart attack or the return of breast cancer. Repeat occurrence coverage varies by issuer and policy.

Some policies offer the option to include hospital coverage for other illnesses or injuries. For example, a policy may offer an additional rider for coverage that pays up to $500 per day (limited to 10 days per year) for a hospital stay for any condition.

Employers also may have the flexibility to choose which coverage options to offer based on the rest of their benefit package. For instance, a company may choose to exclude coverage for cancer if it already offers a cancer insurance plan.

Generally speaking, most critical illness insurance plans offer the following:

• Guaranteed coverage for employers with 25 or more workers
• No underwriting questions or medical exams
• Wellness benefit payment of $25 to $100 for completing certain routine wellness procedures or screenings (including smoking-cessation and weight-loss programs)
• Caregiver rider option to help pay for caregiver responsibilities for a parent with Alzheimer's

Accident Insurance
Accident insurance covers expenses that may arise from an accident such as a sports injury, a car wreck, or a slip and fall. Each year, more than 80 million people in the U.S. seek medical treatment for injuries. Of them, more than half (43 million) seek treatment at a hospital emergency room, which is the most expensive facility in which to receive treatment.

Because accidents are generally unexpected, workers can experience immediate financial stress trying to pay for initial treatment and related expenses. Accident insurance provides coverage to help the insured pay for medical and other out-of-pocket costs incurred after an accidental injury. This may include emergency treatment, hospital stays, transportation, and accommodations if you need to travel away from home for treatment.

Typical accident-related costs may include:

• Emergency room or urgent care facility treatment
• X-rays or MRI
• Injury or diagnosis, such as burns, dislocations, fractures, concussions, eye injuries, and lacerations
• Rehabilitation
• Ongoing pain management (e.g., medications, acupuncture, support equipment, therapeutic massage, chiropractic)
• Hospital admission and stay
• Follow-up visits to doctors
• Occupational or physical therapy
• Air and ground ambulance transportation

Even if a worker has health insurance, today's high-deductible plans can create a hardship from medical bills before coverage kicks in. The payout from an accidental injury plan can help pay for these costs toward the deductible. Like a critical illness plan, the benefit is paid directly to the covered worker and can be used for any expense, including childcare or other household expenses that enable the worker to focus on getting better rather than how to pay mounting bills.

Here, too, employers may be able to tailor the benefits offered to meet the needs of its worker population. For example, the policy may offer riders (for an extra charge) that pay out benefits for:

• Accidental death and dismemberment
• Catastrophic loss
• Occupational accident
• A medically necessary accommodation to the insured's home or vehicle
• Hospital confinement – an additional benefit payment for each day the insured is in a hospital
• Disability rider – an additional benefit payment if insured becomes disabled and unable to work (duration of payments may vary from 26 to 52 weeks)
• Enhanced protection for child athletes – such as a 20% payout increase for a covered dependent child (18 years or younger) who is injured while participating in an organized sport
• Wellness rider – benefit payment of $50 to $150 a year for completing routine wellness procedures or screenings

Prevalence
According to a 2016 survey by the Employee Benefit Research Institute (EBRI), 53 percent of employers pay at least some of the cost of supplemental health insurance. Among them:

• 28% offer accident insurance
• 21% offer supplemental health insurance
• 19% offer critical illness insurance
• 16% offer cancer insurance

Both Critical Illness and Accident insurance plans offer enhanced financial security to employees and supplement financial gaps that exist with health insurance plans. Employers are able to take advantage of leveraged group purchasing power to secure lower premiums, and then offer them as a voluntary benefit so there is little or no cost to the business.

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