Despite the financial protection provided by Health insurance policies, most major illnesses will inevitably result in significant out-of-pocket costs. It's this fundamental element of Health insurance that has caused many employers to expand their voluntary benefits programs to include critical illness.
This policy basically lists a variety of medical conditions, such as cancer, renal failure, paralysis, stroke, and heart attack, within the policy. The insured individual will receive a fixed, lump sum payment if diagnosed with an illness listed within the policy. A per-day benefit may also be paid for certain treatments, surgeries, and hospital drugs. The insured individual will receive a direct benefit payment that they can use however they see fit - medical deductibles, medical travel, or just covering household expenses.
The coverage amount can be as high as $1 million dollars, but, for premium affordability, most employees elect coverage more along the lines of $5,000 to $50,000. Premium pricing is also based on several personal factors, such as geographical location, gender, age, tobacco usage, medical history, and current state of health. Additionally, premiums are likely to be higher with higher-quality policies containing a broader definition of what medical conditions are covered. Although premiums for individual policies aren't tax-deductible, the receipt of the benefit is tax-free.
Critical Illness insurance can definitely assist in paying some of the costs being shifted from employer to employees, but it shouldn't be mistakenly considered a replacement for other insurance policies. It should instead be considered a separate, supplementary, and complementary coverage to major medical, disability, and long-term care.
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Research has shown that the probability of both diagnosis and survival is on the rise when it comes to critical illnesses. Research by MetLife estimated the average recovery cost for a critical illness to be around $35,500, a large portion of which is from lost wages. When a critical illness strikes, and it can strike anyone at anytime, it can be an emotional and financial roller-coaster. Critical Illness insurance can help keep the financial side of the roller-coaster stable.
The Critical Illness insurance market is fairly young. As more employers become aware of critical illness products, employees will find more access to group plan products and better deals. These group plans may also make it more likely to have some degree of guaranteed issue limits that would mitigate some of the factors that would cause an individual obtaining the insurance on his/her own to be turned down for coverage by an insurer.
Employer Considerations. Employers considering offering Critical Illness coverage should keep in mind that not all carriers and products are equal. Definitely consider how the product is being sold. For example, cancer insurance sold by commissioned agents using high-pressure sales caused the sector to gain a poor reputation among some employers. Here are some tips when evaluating carriers:
- Is the agent commissioned or salaried? Most experts recommend working with salaried benefits agents/councilors to avoid high-pressure sales.
- Employers should work with a carrier that has experience working with businesses of an alike size to better ensure company and employee needs can be successfully accommodated.
- Insurance regulations vary from state to state. Larger employers, especially those operating out of multiple states, should look for a group plan to help ensure all employees, regardless of location, are eligible for the same benefits.
Employers should look at the waiting period between when the policy is purchased and will pay claims and try to avoid those with a waiting period exceeding 90 days. Employers should also consider limiting how many policy choices are offered to avoid employees losing interest or becoming overwhelmed. It might be best to make these limited offerings on the lower end of the spectrum, such as $10,000- 30,000 policies, for affordability purposes.
Two Cost Caveats. It's important for employees to weigh the appropriateness of obtaining critical illness insurance and to be completely aware of the cumulative premium costs. If an employee is finding major health plan deductibles difficult to pay, then they could also find it financially challenging to have the premiums for critical care insurance deducted from their paychecks. Those with high-deductible health plans (HDHPs) could find more reasonable to direct the money toward a health savings account (HSA) that would provide assistance paying for future medical expenses. However, where the benefit from critical illness insurance can be used as the insured sees fit, HSAs can only be used for qualified medical expenses. Employees can become insurance poor. Among HSAs, Health Care Flexible Spending Accounts, Major Medical, Dental and Vision, Life insurance, Disability, Long-Term Care, retirement plan contributions, and so forth…the average worker can easily find that they don't have much of their salary left to take home.
In summary, the demand for voluntary insurance policies like Critical Illness is increasing. Employees are concerned about the rising health care and out-of pocket costs they're shouldering. They're increasingly becoming aware of the financial limitations and potential financial risk exposures that exist in today's health plans and are looking for ways to fill the voids.