Augmenting consumer-driven health plan offerings with disability insurance can help lessen the sting of medical bills and, if an employee does have a health issue, it can help pay the bills and get the employee back on his or her feet.

Helping employers better understand the facts about consumer-driven health plans and how they can affect employees can assist in making a stronger case for disability. There's no magic wand, but by being familiar with the challenges that consumer-driven health plans present, you'll create a natural sales opportunity with current clients and prospects. You'll also provide the opportunity for their employees to have access to the disability coverage they need.

CDHP growth

It's hard to argue the growth of CDHPs. Aon Hewitt's 2012 health care survey, released in September, found that 58 percent of employers across the U.S. now offer a CDHP, up from 41 percent in 2011. Eleven percent of employers in the same survey offer only CDHP options and have gone “full replacement,” eliminating PPO and HMO options altogether.

But as consumer-driven health plans grow in popularity, the increased financial exposure they can create presents a new set of challenges to employees and their families. When a health issue arises, finding the funds to cover a high deductible can be difficult. Even in the best case scenario, an employer contributes funds into a health savings account or health reimbursement arrangement on the employee's behalf but the money might not be available right away. For an employee that isn't adequately prepared, news of their negative experience can spread like wildfire throughout a company and potentially undermine any type of full-replacement CDHP strategy.

Unintended consequences

The 2012 Annual Survey of Employer Health Benefits, completed by the Kaiser Family Foundation and the Health Research and Educational Trust, found that the average deductible amount for employees in consumer-driven health plans (connected to both HSA-qualified CDHPs and HRAs) was $2,086 for individuals and $3,924 for families. Many, but not all, employers offer some type of contribution into the HSA or HRA, and the amounts vary widely.

Deductible amounts for CDHPs have been rising since 2003, according to the survey.

HSAs

The 2012 Kaiser survey also found the average employer contribution was $609 for individuals and $1,070 for families. The difference between average employer contributions and deductibles was $1,581 and $2,998, respectively. These numbers don't take into account out-of-pocket maximums, additional copays above the deductible, etc., but it does illustrate the gap employees can be responsible for in the event of a health issue.

HRAs

The average employer contribution was $970 for individuals and $1,840 for families, according to the survey. Because HRA funds are considered employer property and are not portable, it's expected that the contribution amount would be higher than that for HSAs. The difference between average employer contributions and deductible amounts is $953 and $1,826, respectively.

For many CDHPs, expenses continue to add up even after deductibles are met. HSA-qualified CDHPs are required by the lRS to have an out-of-pocket maximum of no more than $6,050 for single coverage and $12,100 for family coverage in 2012. HRAs have no such limitations. The Kaiser survey found that among workers enrolled in these plans, 10 percent have no out-of-pocket maximum for single or family coverage. Employees continue to pay as long as care happens.

Traditional preferred provider organization plans aren't without costs—whether it be a copay, percentage cost share or deductible that the employee would be responsible for paying. But in many cases, the amount that the employee is responsible for while under a PPO plan is less than that of a CDHP. The monthly premium cost is likely higher in exchange for lower unit costs as health care occurs.

Health care expenses

When talking to employers about disability insurance, it's not only those enrolled in CDHPs that can benefit from a policy. Employees living paycheck-to-paycheck can greatly benefit from having a policy in place before a health event occurs. Talking to employers directly with the facts about the financial instability their employees face can help you to approach the subject without the employer feeling like you're passing judgment and looking down on them.

Financial instability

Medical expenses, and the debt that can accumulate from them, are all too common. The Center for Studying Health System Change found that one in five American families has trouble paying off medical debt. Though medical debt is certainly not new or unique to those enrolled in CDHPs, the American Journal of Medicine finds a huge increase—nearly 20 percent—in medical bankruptcies between 2001 and 2007. Of all bankruptcies filed in 2007, 62 percent were tied to medical expenses. And filers were not uninsured. Three-quarters of those who filed for bankruptcies in 2007 actually had health insurance.

Living paycheck-to-paycheck

Medical debt is only part of the equation. According to a recent study by the America Payroll Association, more than two thirds of Americans report living paycheck-to-paycheck. When a medical issue happens, the loss of income can be even more problematic than medical bills. Half of working Americans couldn't make it a month without a paycheck before financial difficulties set in, and more than one in four would have problems immediately, according to a LIFE Foundation survey.

Health care cost increases and concerns about health care reform take precedence over disability coverage discussions for many employers. You might encounter resistance to add even one more line of coverage to the list of employee benefit options—and it's understandable.

Adding another payroll deduction option to an employee's paycheck is not something to take lightly, nor is another line item in the employee benefits budget.

Administrative complexity can also be a barrier for understaffed human resource departments. Finding a carrier that offers onsite enrollment, assistance with eligibility feeds and experience with the implementation process can make it as simple as possible for the employer. Guiding the employer through the process with your experience and assurance is also key.

Allocating budget dollars

If an employer doesn't have budget dollars to contribute to the premium for disability coverage, voluntary options mean that employees can benefit from a lower group rate. Employers that provide access to disability coverage are, unfortunately, in the minority. Consider the following statistics from the Bureau of Labor and Statistics' National Compensation Survey from March 2011:

36 percent of civilian workers had access to group short-term disability coverage
33 percent of civilian workers had access to group long-term disability coverage

As you might expect, more business and financial-related employers offer disability coverage than service-related employers. The low overall numbers are a call to action—it's likely that the employee's spouse doesn't have access to disability coverage through his or her employer, either.

Offering disability products, both short and long term, along with basic education, can mean financial security for employees. Disability coverage isn't normally at the forefront of people's minds unless perhaps they work in insurance or know someone close to them who has recently been disabled. With health care reform and the creation of exchanges, it might be even less noticed now. But by educating your customers and their employees, you can have a hand in ensuring that families have secure financial futures.

Jim McGovern is vice president of national sales and service for employee benefits for the American United Life Insurance Co., a OneAmerica company.

Instant Insights /

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