Posted by David Goldfarb
Critical Illness and Accident Plans are becoming Essential Components in Employee Benefit Plans
It’s no secret that employers have been forced to decrease or even eliminate some employee benefits. But doing business in an economy that’s still stuck in neutral requires great resolve, including a commitment to avoid any knee-jerk reactions that serve as pennywise but pound-foolish within the larger context of talent management.
While discretionary dollars are scarce, the need for benefits remains high. Employees increasingly realize the value of voluntary benefits to fill gaps in core insurance coverage.
There has been a dramatic shift from employer-paid disability coverage to employee-paid plans over the past 10 years and using a voluntary short-term disability plan to dovetail with an employer-paid long-term disability plan can be a win-win for both parties. Also, the use of critical illness and accident coverage to complement major medical plans helps employees take care of out-of-pocket expenses, such as co-pays, deductibles and coinsurance.
Complementing Consumer-Driven Health Plans
A key HR objective is to help employees leverage their benefits for greater financial protection, which also involves more careful shopping for health care services. One popular strategy is to adopt high deductible consumer-directed health plans (CDHPs) featuring a health savings account or health reimbursement account to help ease the financial sting of rising out-of-pocket health care costs.
Today, nearly 60% of organizations with 1,000 or more employees across a range of industries now offer a CDHP compared with 53% a year ago, estimates a new survey by Towers Watson and the National Business Group on Health. When employees have a bigger financial stake in their benefits coverage, they are expected to make more careful decisions – a process that also involves meaningful consideration of supplemental plans to optimize their financial protection.
Accident insurance can help cover ER visits, physical therapy treatments, chiropractic visits and similar types of expenses, while critical illness policies with larger benefit payments may be used for coinsurance, out-of-network treatment or even such expenses as one’s mortgage.
These two supplemental insurance plans, no doubt, boast a synergistic fit. And while both are an integral part of each employee’s overall financial protection plan, there may be instances when cash-strapped individuals must choose between the two plans. It’s no small wonder, considering that many working Americans admitted in a 2011 CareerBuilder survey to living paycheck to paycheck. A solid communication campaign explaining more about the purpose of these plans and who could benefit the most can help guide the workforce through such a decision.
For example, an accident policy may be particularly valuable for an active family. Children participating in sports activities at school are usually at risk for minor accidents so this could be a good fit for them. Critical illness policies may be the first choice among employees who have not accumulated sufficient savings to cover major daily living expenses in the event that they miss work for an extended period of time.
Key selling points
Irrespective of the circumstances, there are key selling points for each of these two voluntary plans. The guaranteed-issue aspect of accident insurance, for instance, enables employees to sign up without answering any questions about their health. The plans also offer affordable coverage that may extend to all family members, along with an easy claim-submission process. Benefits typically cover ER treatment, hospitalization, ambulance transport and follow-up care. Another important point to consider is that these plans are excluded from the so-called “Cadillac” excise tax scheduled to take effect in 2018.
With critical illness insurance, which also offers family coverage, a lump sum payment is made at the point of diagnosis of a covered illness or event, while the benefit is tax free and funds can be used at the insured’s discretion. Unlike accident insurance, limited underwriting is required to obtain such coverage, but it’s also worth noting that critical illness policies usually offer a wellness benefit to motivate people to seek health screening tests.