The uncertainty surrounding efforts to kill or change the Affordable Care Act should make this a great time to sell supplemental health insurance products in the voluntary benefits market.
Accident insurance, hospital indemnity insurance, cancer insurance, critical illness insurance and other supplemental products are like umbrellas that workers can use to make up for the holes in the employer's major medical coverage.
The holes were growing rapidly before the ACA came along, and they kept growing after the ACA arrived. The average annual deductible for a worker with single coverage increased to about $1,200 in 2016, according the Menlo Park, California-based Henry J. Kaiser Family Foundation. That's up from an average of about $500 in 2009, before the ACA took effect, and up from about $300 in 2006.
Typical workers, meanwhile, have no spare cash. Rob Grubka, president of employee benefits at Windsor, Connecticut-based Voya Financial, says 46 percent of Americans would have to borrow money to handle a $400 emergency expense.
Now, the attack on the ACA seems likely to poke new holes in major medical coverage, and ease restrictions on use of supplemental health products to fill the holes.
If, for example, the federal government stops enforcing the ACA employer coverage offer mandate and the individual coverage ownership mandate, some employers may drop their major medical coverage. Some workers may stop taking up the coverage their employers offer.
Republicans in Congress and the executive branch may also roll back Obama administration efforts to restrict sales of supplemental products that could compete with major medical coverage.
Because of those changes, workers could make more use of supplemental health benefits both to fill growing gaps in major medical coverage, and to compensate for loss of access to major medical coverage.
But, of course, in the insurance industry, every potential opportunity comes with concerns about potential risks. Here's a look at some of the potential risks.
1. Major medical uncertainty
The Affordable Care Act has had a more dramatic effect on the individual market than on the group market, but it's done plenty to change the group market. ACA change efforts could change the group market even more. How group major medical evolves will shape the supplemental products workers need.
Ashley Mehrer, a voluntary products development executive at Chattanooga, Tennessee-based Unum Group, says it's too early for Unum to tell what opportunities might emerge from efforts to change the ACA.
Jeff Smedsrud, co-founder of Miami-based HealthCare.com Inc., a web-based insurance quote service, says he's assuming Congress will eliminate the ACA mandates but save some kind of subsidy for purchasers of individual health coverage.
Grubka says product designers at Voya are trying to focus on what they knew for certain. "The growing prevalence of high-deductible health plans means more costs are moving to consumers," he says.
Mehrer and other voluntary benefits specialists say the best defense against major medical market uncertainty is a flexible product.
"Having detailed information can certainly help us customize plan designs and price points," Mehrer says.
But she says Unum tries to design products so they'll be valuable even when conditions change.
2. Major medical deserts
Marilyn Tavenner, the president of America's Health Insurance Plans, a Washington-based insurer trade group, testified at a Senate hearing in early February that problems with efforts to change or replace the Affordable Care Act, or delays in efforts to set rules for 2018, could lead to loss of access to individual coverage in many U.S. markets.
Severe disruption in the individual market could disrupt the small-group market.
Insurers and brokers may need to get creative to come up with quick solutions for employers in coverage deserts.
Smedsrud, for example, says he expects to see explosive growth in sales of fixed indemnity plans that can pay more than $1 million per year in benefits.
If Congress makes major changes in federal health laws, voluntary products issuers might need to replace their old products with updated products. But state insurance departments might be too busy dealing with upheaval at major medical insurers to have an easy time processing filings for new supplemental health products.
4. Employer confusion
When the Affordable Care Act was coming to life, employers were too busy worrying about the ACA to think much about supplemental benefits.
Now, securities analysts are wondering whether a shift away from the ACA could lead to another period of employer angst and inability to focus on products other than major medical.
Executives at Unum and Columbus, Georgia-based Aflac Inc. took questions about that topic during recent conference calls with analysts.
At Aflac, for example, Teresa White, the president of Aflac's U.S. unit, said last week that she's still talking to agents and brokers to find out what they're hearing about employers' reaction to ACA change uncertainty.
5. Risk management worries
Writing a profitable supplemental health product is harder than it looks.
In 2015, for example, when the major medical looked stable, Michael Weilant of Milliman noted in a presentation at a Society of Actuaries event in Austin, Texas, that issuers were struggling with low participation rates by employers' employees, and pressure from employers to offer products without asking about the workers' health.
Another speaker, from a carrier, complained about declining enroller access to employees.
Major medical turmoil could make any existing voluntary market risk-management problems worse.
6. Killer competition
Although Affordable Care Act change paralysis could keep some insurers from competing effectively in the market later this year and in 2018, disruption in the major medical market could push some major medical carriers into efforts to make up for lost major medical business by increasing voluntary products sales.
7. Crazy growth
Sales growth that's far stronger than expected can strain an insurer's capital reserves and lead to claim projection problems.
This risk could especially acute if a botched Affordable Care Act change effort pushes large numbers of employers to use supplemental health products as major medical coverage alternatives.