By Barry J. Petruzzi, Second Vice President, Group BenefIts the Guardian Life Insurance Company of America
Critical illness insurance is now more relevant than ever due to several factors at play in both the insurance marketplace and the economy at large.
Employers are moving toward consumer-directed plans, but employees take issue with the high deductibles. These deductibles can be a major hurdle for many American families that are now struggling to save money and cut down credit card and loan balances in a tight, recessionary economy.
Bundling these health plans with critical illness insurance and including a hospital rider can shield enrollees from the financial shock of a medical emergency and provide broader coverage than a traditional PPO plan. With the combination of the consumer-directed plan, critical illness insurance, and hospital rider, participants can receive a lump-sum payment to cover any number of expenses, including medical deductibles, copayments, out-of-network care, child care, travel, lost compensation of family caretakers, etc.
The hospital rider is key because it provides coverage for ailments that require hospitalization but aren’t covered by the core critical illness policy. The hospital rider mitigates past concerns about older critical illness policies that cover relatively common ailments such as heart attacks, cancer, strokes, major organ transplants, and kidney disease, but might not cover rare illnesses. The price tag to participants in many cases can net 20%, or more, in cost savings when compared to a traditional PPO plan. A reduction in premium cost relative to a PPO plan for broader coverage is likely to trigger a wave of these types of bundled policies in the future.
Medical advancements that have prolonged longevity underscore the value of critical illness insurance. There are treatments to combat cancers and reverse the effects of hypertension and heart disease that were unimaginable a generation ago. The miracles, however, often come at a steep price, making it all the more imperative for employees to find ways to fund health expenses. On top of it all, our aging has made a generation of consumers conscious of the needs that elderly parents will have. In these cases and more, critical illness insurance is cropping up as an optimal solution.
A few years ago, critics said policies were too limited in scope, essentially offered on an individual basis with more extensive underwriting and covering a very limited number of maladies. Our industry has effectively responded to those issues at a time when Americans are more focused than ever on protecting their financial security.
In the past few years, more insurers have entered the group critical illness market, giving employees greater access to coverage for less than the cost of individual coverage. The wider availability and, in some cases, ability to underwrite critical illness on a guaranteed standard issue basis makes the coverage more appealing to the masses.
In the future, look for the critical illness safety net to be expanded further to protect more and more policyholders. Expect innovations that will help mold insurance products to ever-changing needs.
And what about the 600-pound gorilla in the business—health care reform? Interestingly enough, we’ve seen critical illness enrollments remain robust over the years in universal health care markets such as Great Britain and Canada. The reason is simple enough. While consumers may rely on state health care in many instances, they like to safeguard their ability to select treatments, professionals, and cutting-edge services under certain circumstances, particularly very grave illnesses or injuries. Critical illness insurance protects policyholders’ ability to choose. In all, our industry has the means to keep an important product like critical illness not only relevant but also indispensable no matter what market landscape lies ahead.
Barry J. Petruzzi, fellow of the Society of Actuaries and member of the American Academy of Actuaries, is second vice president, group benefits, The Guardian
Life Insurance Company of America. He is responsible for the group life, disability, and critical illness insurance units at Guardian. He can be reached at Barry_Petruzzi[at]glic.com.