Employers Offer Lump-Sum Plans For Some Illnesses
By Michelle Andrews
Tue, Jan 5 2016
Insurance policies that pay a lump sum if workers get cancer or another serious illness are being offered in growing numbers by employers. Companies say they want to help protect their workers against the financial pain of increasingly high deductibles and other out-of-pocket costs. But it’s important to understand the limitations of these plans before buying.
Critical illness plans have been around for decades, but they have become more common lately as employers have shifted more health care costs onto their workers’ shoulders.
Forty-five percent of employers with 500 or more workers offered the plans last year, up from 34 percent in 2009, according to benefits consultant Mercer. Employees are generally responsible for the cost of coverage, although in some cases bosses contribute to the premiums.
“What we have seen is a very clear and steady rise in the number of employers offering high-deductible plans,” said Barry Schilmeister, a principal in the health and benefits practice at Mercer. “More employers are looking at the reality of pulling back on the value of health plans but looking to offer something else that would make people feel a little more comfortable about taking on that additional risk.”
Forty-six percent of workers covered by insurance on the job faced a deductible of at least $1,000 in 2015, up from 22 percent in 2009, according to the Kaiser Family Foundation’s annual survey of employer sponsored coverage. (KHN is an editorially independent program of the foundation.)
Critical illness policies typically provide a lump sum if someone is diagnosed with cancer, heart attack, stroke, kidney failure or needs a major organ transplant. They may also pay benefits for other medical problems such as loss of vision or paralysis; plans have an average of 19 eligibility triggers, according to a market survey by Gen Re, a company that offers insurance to insurers to help manage the risk from underwritten policies. In addition, some employers also offer a policy that pays only in the event of a cancer diagnosis.
Nine out of 10 critical illness policies are sold through the workplace, according to Gen Re. These plans provide an average $15,000 payout to workers diagnosed with one of the conditions covered under the policy. Plans sold on the individual market pay $31,000 on average, Gen Re said, but applicants generally have to go through medical underwriting to qualify. Employer plans usually don’t require that.