With tough economic times and ever-increasing health care costs, many Americans feel they just can’t afford to get sick.  The financial impact that a critical illness, such as a heart attack, cancer, or stroke, can have on a typical U.S. household can be devastating, with many lacking the resources needed to cope with an unexpected medical expense as well as the associated loss of income.  MetLife’s white paper, Critical Times Require Critical Solutions, exposes the gaps in personal financial safety nets that a health situation may create despite having medical and disability income coverage and outlines steps employers can take to help employees obtain the right amount of protection. To download the white paper, visit www.metlife.com/criticalillness.

“The recession and the slow economic recovery have awakened and renewed people’s interest in the idea of financial protection,” said Jodi Anatole, vice president, Critical Illness Insurance at MetLife.  “But there is a lack of awareness on two fronts when it comes to the financial implications of a critical illness on a household budget.  One is that people do not understand what critical illness insurance is, and how it can provide a financial safety net to help cover the unexpected costs of a critical illness.  The other is that people do not realize that their medical and disability coverage may not address the full financial consequences of an illness – and are often surprised to find that there are uncovered expenses.”

A State of Unpreparedness

With nearly one in two working Americans having less than $5,000 in savings to cover expenses   in the event of a major illness, and more than half of those admit to having less than $500, it is not surprising that 55% of full-time working Americans are somewhat or extremely concerned that a critical illness could impact the financial well-being of their families, as revealed in the study. 

The research detailed in the study found that the average financial burden associated with recovering from a critical illness is $35,500, most of which is linked to lost income. It is sobering to note that few are prepared to cope with these unforeseen expenses: only 16% of those surveyed feel confident they could pay for a medical emergency.

Critical illness insurance (CII) can help these situations.  CII can complement existing medical and disability coverage and other financial protection products by providing a lump sum payment to help offset the spike in out-of-pocket expenses resulting from certain critical illnesses, such as cancer, stroke, heart attack, major organ transplant, or kidney failure.

“Receiving a lump sum payment can make a significant difference to families given that about one in four working Americans simply did not know where they could turn to for financial help if confronted with a critical illness, and 39% cited the need to go into debt – whether borrowing from a bank, from their home equity, or from friends and family,” adds Anatole. “These findings underscore the important role that critical illness insurance, along with other protections such as disability income insurance, can play in strengthening a family’s financial safety net.”

Meeting the Challenge

CII can be an important addition to an employer’s voluntary benefits package that can help employees be better prepared for the financial consequences of a critical illness.  As employers are increasingly looking for ways to manage their benefits budget, CII can help employers ease the transition to (lower-cost) higher deductible health plans by providing employees with a lump-sum payment to offset out-of-pocket expenses associated with a critical illness. With a mere 7% of employees who say they own CII, a tremendous opportunity exists for employers to help their employees develop a financial safety net in the event of a critical illness.

Additionally, including CII as a voluntary offering within a comprehensive benefit program can be a cost-effective way for employers to improve employee benefit satisfaction and employee retention.

However, educating employees about critical illness is key to ensure their participation.  The white paper explains that just 28% of full-time employees surveyed say they have heard of CII and among those, the majority are confusing it for health insurance, disability income insurance, or a government insurance program. Notably, about 75% of employees who don’t own critical illness insurance or have never heard of it, find the concept appealing once the products features are explained. Most are even willing to pay the entire premium.

Anatole offers the following suggestions for crafting an effective campaign aimed at maximizing employee participation in a voluntary CII benefit:

Promote CII as a supplement – Promoting critical illness insurance alongside other core benefits as a supplement to existing medical and disability income benefit plans can help employees better understand the gaps in their coverage and how CII can strengthen their financial safety net for meeting out-of- pocket medical and non-medical expenses.

Improve communications – For better communications, employers can correlate an employee’s benefits offering with her or his individual financial concerns, or illustrate how financial protection benefits are relevant in building a strong personal safety net and helping to provide peace of mind. Strong benefit communications can also help reinforce the employer’s commitment to their employee’s well-being and strengthen employee engagement in the benefits program.

Keep the product simple – Keeping the product simple is one significant way to ensure that the benefit communications are straightforward and effective. The lump sum that CII offers eliminates the need for ongoing claims paperwork. There is also flexibility for the employee. They can use the lump sum payment as they see fit for both medical and non-medical expenses.

Offering critical illness insurance can have a positive impact on employees’ perception of their employer because it helps fill a potential gap in their financial safety nets at a low cost. In addition, it helps employees more easily handle financial issues during a critical illness, which allows them to focus on their physical recovery and may help them return to full productivity.