UnumProvident: Health Care Cost Shifting Makes Supplemental Health Plans Essential
05/03/2005
By Bruce Shutan, BenefitsNews.com During a time of aggressive cost shifting in group medical plans, 100% employee-pay supplemental health benefits are emerging as an effective cost management tool. The plans allow employers to offer additional benefits at little or no cost, and they help employees offset rising out-of-pocket expenses. Supplemental health plans are of particular value when an employer has implemented, or is considering, higher-deductible medical plans and lower catastrophic benefit levels.
The plans represent a major opportunity for employee benefit advisors to grow their business, as well: a recent article in Best's Review predicts benefit brokers stand to control up to 60% of supplemental benefit sales in the next five years.
"Employers and their advisors are using supplemental benefits to create plan designs that meet the needs of total employee populations," says Neiciee Durrence, vice president of life product development for UnumProvident Corporation.
Care at a cost
Durrence notes that, in response to skyrocketing medical costs, many medical plans now exclude coverage for experimental treatment, out-of-network specialty care, incremental costs associated with hospital stays or medical procedures, and related out-of pocket expenses such as co-pays, out-of-town travel and child care.
Employees are the hardest hit by these changes. An unpublished study by the Commonwealth Fund think tank found that 29 million Americans or 14% of adults are in serious medical debt, while the Cambridge Consumer Credit Index shows 83% of Americans with medical debt say those debts have prevented them from making major purchases. Worse, more than half the 1,771 bankruptcy filings from 2001 detailed in the April 2005 issue of Health Affairs were triggered by medical expenses, even though most of the families studied had medical insurance.
UnumProvident has built a supplemental health portfolio to meet marketplace needs. "We offer accident, cancer and critical illness policies, and this summer will add a hospital-expense contract," Durrence reports.
"Through this portfolio," she says, "we're able to help employers and employees with supplemental benefits for inpatient, outpatient and catastrophic health care expenses. This covers the full spectrum of potential need."
Communication strategies
At the employee level, supplemental policies usually appeal to middle-income consumers earning $20,000 to $75,000 a year. Within the UnumProvident portfolio, Durrence says, employees have reacted most favorably to critical illness benefits. One explanation is risk. The American Heart Association reports that one in four people have some form of cardiovascular disease. And according to the American Cancer Society, men have a one in two risk and women a one in three risk of developing cancer. Another factor is an aging workforce. The average purchaser for critical illness benefits is 40 to 45 years old, and is informed about their likelihood of a critical illness diagnosis, Durrence says.
Among employers, supplemental packages appeal to small and midsize firms not able to afford generous coverage for core or ancillary plans, as well as to larger companies placing greater financial responsibility on employees and their families.
To make any supplemental program successful, however, communication is key. Employee participation is highest when the communications strategy includes one-on-one interaction with licensed insurance agents, accompanied by call center assistance as needed. Ideally, supplemental benefits are enrolled in conjunction with core benefit offerings, which helps the employer communicate the "hidden paycheck" value of the total benefit program.
"When you sit down and talk about the essential value of these products to employees, you end up talking about how much they can afford each week because they have limited income to spend on benefits," Durrence says. One rule of thumb is that people are willing to spend, in weekly payroll deduction, the equivalent of their hourly wage on any combination of supplemental benefits, which comes out to about $5 to $7 a week or $300 to $350 a year per supplemental offering.
One good selling point: the dollars spent to pay for coverage ensure that additional financial help is available when they have a covered medical event.
Bruce Shutan, former managing editor of Employee Benefit News, is a freelance writer based in Los Angeles.
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