How Critical Illness Insurance Can Protect the Financial Health of Your Employees
The Centers for Disease Control and Prevention, 2019 reported heart disease is the leading cause of death in the United States, causing approximately 647,000 deaths per year. Cardiovascular disease is resulting in 1 out of every 4 deaths in the U.S. That’s a death every 37 seconds.
In the U.S. alone, someone has a stroke every 40 seconds, accounting for one out of every 19 deaths. (American Heart Association, 2020). They further project that by 2035, more than 130 million U.S. adults will have some type of heart disease. (American Heart Association, 2018).
In its Cost of Cancer 2020 Edition, The American Cancer Society (ACS) estimated that in 2020 we’d see 1.8 million new cases of cancer diagnosed in the U.S.
Suffering a heart attack or receiving a cancer diagnosis is not only emotionally devastating to an employee and their family, but also financially crippling when you factor in the cost of treatment, hospital stays, and loss of income. Heart attack patients pay about $21,500 per hospital stay for an average length of 5.3 days, according to the Agency for Healthcare Research and Quality.
Critical illness insurance was introduced only a short time ago, in 1996, when the awareness of the financial burden that follows a diagnosis and treatment of a critical condition gained greater attention. Financial burdens associated with critical illness diagnoses can easily lead to an employee having difficulty paying bills, delaying or skipping needed medical care, and even bankruptcy. In fact, roughly 60% of bankruptcies in the United States are caused by medical debt, according to a 2018 study.
Wouldn’t it be wonderful if you as the employer could help an employee prepare for emotional and financial hardship in advance? This is where critical illness insurance comes in and where the employer’s choice to offer this benefit to their employees can be a real life-changer.
What is Critical Illness Insurance?
Critical illness insurance is a policy that pays a lump sum benefit to the policyholder if they or one of their covered dependents are diagnosed with a covered critical condition. With most group plans, policyholders pay a 100% premium, and if/when they are diagnosed with one or more of the covered conditions, they file a claim to receive 100% of the benefit amount associated with their policy and that condition.
This money is paid to the policyholder directly on a post-tax basis and can be used by the policyholder for whatever they would like such as rent, loss of income, medical bills, groceries, or travel for medical care. There are no limits on what that money can be used for. Some put it toward medical bills while others may use it to replace lost wages while they go through treatment.
Every policy has slightly different terms and a list of covered conditions. The most commonly covered conditions are also the most prevalent that we’re all at risk for either due to behavior, age, genetic predisposition, or a combination of all. These include heart attack, stroke, cancer, major organ failure, organ transplant, paralysis, coma due to a covered accident, loss of sight, hearing, and speech, and even infectious diseases such as COVID-19.
The amount the employee will receive upon diagnosis depends on a few things most notably; 1.) The benefit amount the employee elected, 2.) the severity of the covered condition (heart attacks are paid at 100% while coronary artery bypass is paid at 25%), and 3.) if it’s the first, second or subsequent occurrence.
Why Offer Critical Illness Insurance to Your Employees?
No cost to you (the employer)
As mentioned prior, the employer/organization has very little if any cost associated with offering critical illness insurance. Like with other voluntary benefits, the employee pays 100% of the premium.
Discounted rates and better underwriting terms
If each of your employees were to seek out critical illness insurance on their own, they would run into higher rates, about 30-40% higher, and a long medical history questionnaire from the insurance that may ultimately result in denial of the policy. With most group plans, policies are “guarantee issue” the first year they are offered to employees. That means no medical questions. everyone qualifies for a policy.
Protects an employee’s financial health
Many employers assume that employees are fully protected with a standard health insurance plan. But, what many fail to acknowledge is that while health insurance pays the doctors, hospitals, facilities, and pharmacies associated with medical treatment and services related to a critical illness; there is a large cost that employees must pay to receive that treatment in the first place – deductible, copays, coinsurance, and leave of absence. Critical illness insurance could be the difference between a skilled employee returning to work in a good place physically and financially after a critical illness – and not returning to work at all.
Curious to know more about this unique employee benefit that protects your employees or how you can easily implement it in your benefits package? Get in touch!
About VSMG
Built by and for Arizona public sector employers, VSMG is a leading employee benefits consultant dedicated exclusively to serving Arizona school districts, municipalities and other public entities for over 19 years. With offices in Phoenix and Tucson, we are committed to delivering expert advice, best-in-class benefits, forward-thinking strategies, and cost-effective solutions to help our school district clients attract and retain their talent. Reach out to us today for more information.
