Ask employers what their number one challenge is today, and almost every one will say "controlling medical insurance costs." No matter where you live, health care cost increases are on everyone´s minds.
Employers want to attract and retain quality employees, but health insurance costs are taking a larger share of their company´s benefits program budget. Employees benefit from having catastrophic coverage, but they also need help paying for higher deductibles as well as the more routine health care costs, such as doctors´ office visits, outpatient treatment, screening tests and more. Employers can either pass increased costs along to employees in the form of higher premiums, deductibles, co-insurance and co-pays, or they can reduce benefits. And, not to mention, they have the added pressure of providing a competitive benefits package to attract and retain employees.
Supplemental health benefits offer creative solutions to the health care cost issue. Consumer-driven health care is laden with creative supplemental health solutions to the health care cost issue—solutions that can help employers save money yet still allow them to provide benefits options for employees. In years past when medical insurance plans were richer, supplemental products often were marketed as coverage for indirect medical costs, such as child care or travel expenses incurred while a family member gets medical treatment. However, in today´s environment of escalating health care and medical insurance costs, supplemental health insurance also is becoming an important cost-management tool for employers.
As employers are forced to raise deductibles on their group health plans this year and in the future, offering supplemental products to employees will help them fill the gaps in lost coverage. Of course, the bonus for employers is that supplemental products do not have to cost them anything. Where supplemental benefits used to be considered "add-on" benefits, the trend now is that they are being viewed as part of a core benefits package.
Advantages of Consumer Products
We are seeing more and more advantages of consumer products being offered to employees, and this trend will continue in the years ahead. CDHC supplemental health products can be:
• Noninflationary. Rates do not automatically increase every year.
• Portable. Employees like the fact that if they leave their current employer, they can take the coverage with them at the same price.
• Guaranteed renewable for life on many products as long as premiums are paid when due.
• Paid for with pretax dollars through the employer's Section 125 plan.
• Customized for individual employee's needs.
Insurance premiums continue to trend toward flexibility. For instance, many plans offer coverage options such as employee, employee and spouse, and one or two-parent families. Some allow employees to select coverage for their spouse or child whether or not the employee is covered under the plan.
Supplemental health benefits are continuing to appeal to individual consumers. For instance, insurance premiums can be changed only if the insurance company changes them on all policies in force in the state where the policy was issued, and are not workplace-specific. Benefits also are paid regardless of additional insurance the policyholder may have with other insurance companies. Benefits are paid directly to the policyholder unless otherwise specified.
There are several different types of supplemental health insurance but there are three categories of products getting a lot of attention from customers and producers for the year ahead: hospital confinement indemnity, cancer or critical illness, and accident coverage.
• Hospital Confinement Indemnity Coverage
Chances are today´s employer-sponsored medical plan does not cover all hospital-related expenses—either for inpatient or outpatient treatment. The bills and expenses can really add up, a problem compounded by the fact that employees are paying more for medical insurance premiums, deductibles and co-payments, while costs for basic health care services continue to rise.
• Cancer and Critical Illness Coverage
Supplemental cancer insurance is becoming more popular, especially among families with an average household income of $25,000 to $75,000, whose lifestyles would be most affected by the out-of-pocket costs of cancer treatment. Designed to fill the gaps of major medical coverage, it pays for a multitude of expenses related to cancer treatment. These can include deductibles and co-payments required by major medical insurance, living expenses, and loss of income during treatment. In the United States, out-of-pocket expenses related to cancer treatment totaled more than $125 billion a year.
In addition to helping offset expenses from deductibles, co-insurance and co-payments, benefits from supplemental cancer or critical illness plans can help employees pay for home health care or caregivers; home or automobile modifications; mortgage, utility bills and other everyday living expenses; out-of-network expenses; and travel costs to and from treatment centers.
• Accident Coverage
Broken arms, burns, dislocated shoulders... accidental injuries like these are more common than you think, and the costs of accidental injuries usually are higher than one expects. These products are typically fairly simple indemnity plans, paying set benefit amounts; however, newer, more innovative products are coming into the market. These include coverage for catastrophic accidents, emergency dental work, and transportation and lodging.
A catastrophic accident benefit can be particularly helpful to employees who experience a serious injury resulting in life-changing situations, and help employers retain employees who are more quickly able to return to work.
Other Initiatives In The Year Ahead
Look for a choice of riders to tailor coverage in the coming year further, such as a hospital confinement rider that helps pay the extra expenses associated with a hospital stay, and a health-screening rider that pays for health screening tests such as a Pap smear, a mammography, a cholesterol test and a stress test.
The National Association of Health Underwriters is working on a policy initiative to include group longterm care policies in Section 125 cafeteria plans. We anticipate that CDHC marketplace realities will continue to move the government to adopt policies that give consumers more choices and control.
Communication Is Key
The steady movement in CDHC enables people to be more aware of the true cost of health care. This directly translates to consumers—employers and employees—understanding the many benefits of a supplemental plan if they did encounter an accident or cancer, for example. Look for a choice of riders to tailor coverage further in the coming year.
When employees understand the benefits they have and the value of what their employer provides, they have more appreciation for their company and use their benefits more responsibly. Communicating the significance of the entire benefits package is an important factor in helping employees appreciate what the employer provides. It is also just as important to educate employers about their benefits program as it is to educate their employees.
Adding CDHC supplemental health coverage to an employer´s core benefits program—and communicating the features—eases the pain of rising health care and medical insurance costs for both employers and employees. Employers benefit by managing the costs of their benefits while providing a competitive benefits package. Employees benefit by being able to choose coverages to meet their individual needs.
Trautwein is a national expert on health insurance. She served four years as the legislative director and lobbyist for the Texas State Association of Health Underwriters and was appointed to President Bush´s health advisory transition team to advise the president and the Secretary of HHS. NAHU represents 20,000 professionals involved in the sale and service of health insurance and related products. www.NAHU.org.
