As critical illness policies become more popular, carriers are tweaking the structure and delivery of the products to meet both employer and employee needs, particularly as the new health care law facilitates the greater use of high-deductible plans.
Sales tactics also are evolving, not only for group and worksite plans, but for individual plans for the self-employed, very small businesses and even as an adjunct for additional homeowner protection.
Excluding an outsized event by one major carrier, overall sales of critical illness increased in 2011. According to LIMRA, worksite sales and sales overall were up 16 percent and 19 percent, respectively. Both group and individual non-worksite sales showed double-digit growth, and eight of the 12 individual carriers, including two new entrants, increased their sales over 2010.
Critical illness insurance products are selling much more now than in the past because there’s been a significant increase in medical plan deductibles and out-of-pocket costs, says Marty Traynor, vice president of voluntary benefits at Mutual of Omaha in Omaha, Neb.The typical high deductible is now $1,500, $2,000 or even higher, and now there are additional costs the typical medical plan doesn’t cover.
Additionally, Traynor explains, there are more people taking advantage of the Family Medical Leave Act to care for family members, so there are more people who need money to replace lost income. Plus, people are looking for the best care and they might want to go out of their network for a different provider.
“There’s more awareness about cancer centers and other specialty providers across the country, and people opt for them instead of a local provider and their out-of-pocket costs are higher,” Traynor says. “They also might want to get a second opinion, which costs extra money.”
More medical insurance brokers and advisors are working with employers to consider this plan as a voluntary benefit, to make up for the increased deductibles and out-of-pocket expenses of medical plans, as well as expenses not covered by medical products, Traynor says. Moreover, brokers are looking for products that are affordable and simple for employees to enroll in and simple for the employer to administer.
“So they’re looking at the whole picture and recommending critical illness plans as an integral part of an overall benefit plan, rather than just a medical plan in a vacuum,” Traynor says.
An increasing number of employers want to make sure as many of their employees as possible have access to critical illness plans, so more are seeking “guaranteed-issue” plans for certain levels of employee participation, says John Harmeling, senior vice president of worksite marketing at Aflac in Columbus, Ga.
“This access affords more employees the opportunity to purchase, which in turn drives higher employee satisfaction retention, lowers turnover and also increases productivity because employees aren’t worrying about all of the additional costs that these types of illnesses carry,” Harmeling says.
With guaranteed issue, employees obtaining coverage in group plans don’t have to provide any evidence of good health, says Jodi Anatole, vice president, critical illness insurance at MetLife inGreenwich,Conn.
“We also realize employers want higher numbers of employees participating,” Anatole says. “Today we offer up to $30,000 in guaranteed issue coverage for group critical illness insurance, up from $10,000 originally.”
Benefits brokers also are increasingly asking for guaranteed-issue plans, says Amy Friedrich, vice president of the specialty benefits division at Principal Financial Group in Des Moines, Iowa.
Previously, critical illness plans were always individually underwritten with their own application and the underwriting could be different for every employee, Friedrich says.
“Now carriers like us offer guaranteed issue, so that brokers don’t have to have two different proposals for ancillary benefits and two enrollment forms—now, there’s just one proposal, one enrollment form and one bill,” she says. “We’re starting to work with employee benefit brokers a lot better.”
Many carriers require a minimum of 50 employees for a guaranteed issue, but that limits coverage to large and mid-sized companies, Friedrich says. Principal’s minimum is 10 employees, so smaller employers can also have guaranteed-issue coverage.
“This is a great fit for us as we tend to work with smaller and mid-sized employers, and we see other carriers also moving their limits down,” she says.
Some employers are even agreeing to pay for part or all of the premiums, which average about $180 a year for MetLife’s group critical illness insurance, Anatole says.
“From an employer’s point of view, it could make sense to pay this premium if their employees are in a high-deductible plan, because the employer would still be saving money,” she says. “The number of employers paying for part or all of the voluntary benefit is still small, but when large employers take this step, it generates a buzz in the marketplace and there probably will be followers. The combination of a high-deductible plan with relatively low cost supplemental voluntary benefits will likely prove an attractive package to more employers.”
Another trend in critical illness coverage is the inclusion of a health screening benefit, giving the insured a reimbursement for screening such as EKGs, mammography and other types of wellness tests, Anatole says. For example, Metlife provides a certain cash amount to help cover the cost, typically ranging from $50 to $100 per year.
Carriers, including Aflac, are also now offering critical illness plans with more staggered benefits, depending on the needs of the employee, such as hospitalization, Harmeling says.
“These plans are often more affordable than lump-sum cash plans,” he says. “With more customer needs—missed work, additional costs incurred—these plans can help lessen the cost burden that can come with more severe impacts of dread disease.”
Moreover, Aflac and a few other carriers now are offering recurrence benefits, he says. Aflac’s group plans currently offer such benefits and the carrier will include recurrence benefits in its new individual plan to be launched in May. Another trend is offering dependent child benefits within critical illness benefits, at no additional premium charges.
Evolving sales tactics
Many carriers and brokers are referring to a Harvard medical study in their sales tactics, which found that, of the roughly 1.5 million U.S. bankruptcies in 2009, 60 percent were the result of not being able to pay medical bills. Of those, 78 percent of the filers had major medical insurance.
“Just over a quarter of Americans have less than $500 available for emergency expenses,” Harmeling says. “There’s just huge customer need—which is why critical illness plans are the fastest-growing voluntary benefit product in the market today.”
Employees want to be equipped financially so that all of these expenses don’t drain their retirement savings, particularly as life expectancy is longer and more people are living longer after a critical illness event, Traynor says.
“So we educate workers about how critical illness policies can help prevent draining their savings,” he says. “That’s a good selling tip, and an important point to cover in enrollment meetings.”
Josh Dau, vice president, supplemental product lines at Assurant Health in Milwaukee, says the carrier has technology solutions to help agents offer the right plan to fit their customers’ needs and budgets, including a simple “check-a-box” process that allows agents to offer customers a convenient way to add a supplemental plan to a major medical plan or other policy. Assurant Health’s technology also offers agents options to sell the carrier’s supplemental plans individually.
“We have a streamlined, single process to apply for multiple Assurant Health products that saves the customer time and creates a better overall experience,” Dau says. “This streamlined application process allows our agents to manage their business more efficiently so they can spend more of their time selling and servicing their clients. In addition, offering supplemental products in 46 states helps expand our agents’ portfolio, so they have additional options available to customize a plan for their clients.”
Mathew Gahm, founder and managing director of Worksite 101, formerly M P Gahm & Associates Inc. in Colorado Springs, Colo., tells employees they’re more likely to suffer a critical illness than death before retirement, and yet more people have life insurance than a critical illness plan.
As a voluntary/supplemental specialist, Gahm’s clients are actually brokers who work mainly with major medical insurance. His company acts as a master general agent for all worksite products, soliciting bids from all worksite companies to get the best products for the broker’s clients. Moreover, if a broker has clients in certain other markets across the country, Gahm can refer them to one of his partners from the National Voluntary Benefits Group.
In the future, worksite benefits will be more controlled by brokers—and because the Patient Protection and Affordable Care Act is changing how much they can be paid, they are now looking for other sources of income, Gahm says.
“Our business model is perfect timing, giving brokers a vehicle to make up for their lost commissions and revenues by providing options from the fastest growing sector in the benefits market,” he says.
Dan Pisetsky, founder and vice president, public relations of the National Association for Critical Illness Insurance and president of US Living Benefits in Old Lyme,Conn., says that critical illness insurance has really “got its wings” and now has credibility in theUnited States, with 50 carriers offering the product.
Critical illness is sold mainly as a payroll deduction or a worksite product, as a gap filler with high-deductible plans or to give a person “liquidity and empowerment to choose to use the lump sum as they see fit”— for child care, experimental treatment, or taking a vacation on their bucket list, Pisetsky says.
But in his own firm and through his networking at the trade association, Pisetsky is also trying to expand the ways critical illness insurance can be sold in the individual market.
“In the United Kingdom, it’s sold around mortgage protection, and so here in the United States, I’m working with homeowners’ insurance agents to leverage their homeowner sales by selling critical illness plans – a $50,000 lump sum policy can pay the mortgage for several years,” he says. “Some agencies are very interested in working with us and this would be a new frontier for critical illness insurance in theUnited States.”
Only a handful of carriers sell individual [CI] plans, but that will change as the individual mandate kicks in and people have to buy major health insurance, Pisetsky says. Self-employed people might opt to utilize critical illness insurance as a gap filler for a high-deductible plan. Owners of small businesses also might buy the product as a way to help support their business and pay their employees if they get sick.
“We know in Canada the majority of sales are not in the benefits space, but by agents selling individual policies, with the average policy being $100,000 in Canadian dollars,” he says. “We know that these Canadian agents are approaching professionals and the self-employed and are meeting with success. I hope this will happen in the United States within five years, as we make consumers more aware of the product.”