Cancer, critical illness insurance offerings on the rise
Not only is group cancer/critical illness insurance coverage up 11% over the last six years but policy provisions have evolved to meet the changing needs of both employers and their employees.
Mercer data from the 2015 National Survey of Employer-Sponsored Health Plans (to be released in April 2016) reveals that the percentage of employers with 500 or more employees offering group cancer or CI insurance has increased from 34% in 2009 to 45% in 2015.
Barry Schilmeister, a principal in Mercer’s New York office attributes the increased interest in these types of coverage to the parallel uptick in consumer-directed health plans. “The same survey shows that 59% of employers are now offering a consumer-directed high deductible health plan and one in four employees are now covered by these plans,” he says.
Schilmeister also believes that a secondary driver for the increased interest in cancer and CI insurance is that to hold down the cost of health plans, many employers have simply increased cost-sharing, which has essentially the same effect as high deductibles. “Employers are looking to add new programs to their total benefit offerings to give people other benefits they can access in situations where the organization needs to pull back on more traditional health care coverage,” he says.
Group CI insurance is generally a voluntary benefit according to Simon Milazzo, voluntary products manager with Unum, which does have offerings structured as an employer-paid benefit. He says a successful enrollment depends on the size of the employer, but the industry standard is about 20%. “The key to a successful adoption of the program is the education and enrollment strategy,” he says.
Gary Harger, VP of voluntary products at UnitedHealthcare acknowledges there has been a shift from cancer to more comprehensive CI coverage, but reports that there are still many employers with cancer-only plans. “The way that we have designed our new CI protection plan is that we have the ability to carve out cancer benefits so that the CI policy can work with the cancer plan that is already part of an employer’s benefit offering,” he says.
CI insurance typically pays plan members a lump sum that can used for virtually anything when they contract one of a series of illnesses or conditions listed in the policy. Unlike individual coverage, group plans are a guaranteed issue without a medical examination, up to an amount specified in the plan provisions.
"One in four employees is now covered by a consumer-directed health plan."
The typical maximum guaranteed issue under a group CI policy is $20,000 or less, according to Harger. “As the number of employees increases to over 3,000 the guaranteed amounts can go up to $30,000 or $40,000,” he says.
While employee premiums for group CI coverage can vary as significantly as the plan provisions, Mercer data pegs the annual premium for a 45-year-old employee with $20,000 of coverage at $400 or $500/year. For UnitedHealthcare guaranteed group CI coverage of the same amount, Harger says the premium is about $250-$300/year.
When the product was first developed, CI insurance would only pay out for one occurrence of a listed condition and subsequently the member’s participation in the policy was terminated. However, policy provisions currently offered by UnitedHealthcare and Unum demonstrate how these provisions have been modified to add value to their CI programs.
“We started out with about six covered conditions and if you were diagnosed with one of these illnesses you got a one-time payment,” Harger says. “Then we moved to classes of conditions and an individual who had more than one successive condition in each of these categories became eligible for multiple payments. Now we have shifted to a list of covered conditions – not categories – where you can literally get paid for every one of these covered conditions.”
Also see: “Critical illness coverage reaches tipping point.”
Unum CI policies will also pay out once per covered condition, but Milazzo says there are a couple of conditions that pay out less than 100% of the policy value. “For example, under our plan, a coronary bypass operation or a carcinoma in situ [a cancer that has not metastasized] will pay only 25% of the insured elected amount but if you have a heart attack a year later, you’ll still be eligible for a full payout on that condition.”
One distinctive feature of UnitedHealthcare CI group policies is the family coverage option that includes guaranteed issue amounts for employees, their spouses and dependent children. “We actually embed coverage for dependent children at 25% of whatever the employee has selected for himself – for example, $5,000 for a $20,000 CI maximum – without additional charge. We also include conditions specific to children like spinal bifida, cleft palate or cystic fibrosis,” says Harger.
Two other recent CI insurance trends that Mercer’s Schilmeister identifies are an increasing number of vendors to choose from and more employers offering voluntary CI coverage at open enrollment along with their traditional benefits. “Again, this is driven by the increase in high-deductible plans, so CI insurance which can help fill coverage gaps is packaged as part of the traditional total benefits offered,” he says.
What to look for
So what plan design features should employers look for when they are researching group CI vendors?
"Make sure you understand the list of illnesses covered, because they can vary from insurance company to insurance company."
“You want to make sure you understand the list of illnesses covered, because they can vary from insurance company to insurance company. The other thing is to check which conditions pay out 100% of the policy’s guaranteed amount,” Schilmeister says. “In addition, find out if a carrier that offers other kinds of supplemental plans like accident insurance or hospital indemnity insurance will give discounts for purchase of multiple lines.”
He also recommends that employers investigate how each insurance company administers their program. Questions employers should ask, he says, include: “What kind of eligibility information do they need? What does it take to file a claim? What kind of employee communications and education does the vendor offer?”
There can also be an administrative advantage to purchasing both health and CI insurance form the same insurance company. Harger says. “At United Healthcare we have a program called Bridge to Health. A patient who is covered by both our health insurance and our CI insurance has access to proactive care outreach that helps them navigate the programs and services available to them under both plans,” he says.