Several
significant changes have impacted the progress of Critical Illness Insurance
(CI) in the United States during 2004/2005. Our current healthcare system continues
to demonstrate the pressing need for CI as a consumer choice. With the advent
of consumer-driven healthcare and the establishment of health savings accounts
(HSAs), deferred, non-taxable money can be used to pay expenses not covered
by high-deductible medical plans. Making appropriate healthcare decisions is
becoming the consumer’s responsibility.
A recent Harvard study indicated that a medical crisis might cause middle-class
families to declare bankruptcy. Although one may have health insurance, one-half
of all bankruptcies (700,000 households/year) are due to medical calamities.
Both medical and non-medical expenses related to a catastrophic illness can
be enormous and may ultimately lead to bankruptcy. Although we may think we
have an adequate health insurance policy, there are several non-covered expenses
that we give little or no thought to. For example, hospital and medical deductibles,
prescriptions and unreimbursed expenses due to maximum benefit caps can run
into the thousands of dollars.
To address this important market need, MetLife has developed an Individual and
Group CI product, and will be introducing a Worksite product in 2006. Having
a company such as MetLife enter the CI arena adds to the credibility of this
product in the United States. Randy Stram, CI point person for MetLife, states
that MetLife’s vision is “to establish CI in the United States as
an essential, mainstream product for building financial freedom."
CI is making its way to the forefront of the insurance industry, especially
with companies like MetLife entering this market with a major commitment to
Individual, Group and Worksite markets.
Although there are only approximately nine companies in the employee benefits
channel, this channel could prove to be the catalyst for greater consumer CI
awareness. Companies are committing major resources to addressing the employee
benefits channel, either through guaranteed issue or voluntary programs. Randy
Stram states that “CI is well received by mid and large employers, and
employers with 50,000 or more employees are expressing a significant amount
of interest in the plan.” Employers are considering CI as a complement
to high-deductible healthcare plans, especially in light of our present healthcare
environment.
CI, especially Group CI, is new to our marketplace. As producers, employers,
and employees become more cognizant of its potential as a “Living Benefit”,
this product may become a mainstream product for employee benefits.
Stand-alone CI products are the usual product design offered in the employee
benefits channel. An offshoot of the stand-alone health product is the CI rider.
Companies such as Jefferson Pilot and The Prudential are offering CI as a rider
on the chassis of their Group Disability products.
We are keeping a watchful eye on issues which continue to exist in the area
of underwriting. Some companies are using guaranteed issue in the employee benefits
arena with more stringent guidelines for pre-existing conditions and coverage
amounts. It's worth noting that tremendous potential exists for anti-selection
with CI products.
Our research indicates that since CI is a relatively new product, there is still
a lack of claims data to reference. Certain carriers have indicated that there
has been an increase in Multiple Sclerosis and Alzheimer's claims and an unexpected
increase in Cancer claims for individuals under the age of forty.
One of the biggest hurdles for CI to overcome is in the area of taxation. Currently,
there are no definitive IRS regulations with respect to CI benefits. Most companies
refer individuals to their personal tax advisors for assistance. With the advent
of the HSA, qualified Long-Term Care is receiving a tax benefit, since the consumer
can use this money to pay for LTC premiums. We in the CI industry need to lobby
Congress for the same tax benefits which qualified LTC has attained through
federal legislation. Through the efforts of the National Association for Critical
Illness Insurance, maybe the day will come for "qualified" CI, that
is, coverage for the core conditions such as heart, stroke and life-threatening
cancer, which compose more than 75% of the critical illnesses in the U.S.
As the founder of the National Association for Critical Illness Insurance (NACII),
I would like to encourage you to become more familiar with our new association.
NACII Mission Statement: To forge an active and effective alliance
among stakeholders in the Critical Illness Arena. The Association’s programs
are designed to educate and disseminate information in an effort to synchronize
development of insurer programs, insurance department regulation, and to enhance
the public’s and producer’s knowledge of the growing need for Critical
Illness Insurance.
NACII Objectives:
• To sponsor and promote practical skill-based education programs.
• To engage in active information dissemination and publishing activities
to increase knowledge and understanding of critical illness.
• To serve as an active liaison to provide research and data analysis
of critical illness and related subjects.
• To work in collaboration with organizations to develop an understanding
of the need for critical illness coverage.
NACII's Third National Conference is scheduled for October 26-28, 2005,
at the Renaissance Hotel in Orlando, Florida. This year, we are fortunate to
have as our keynote speaker, Gaylord Perry, a member of Baseball's Hall of Fame
who will describe his son’s bout with leukemia and how is son benefited
from owning a CI policy.
For information on our conference, please visit our website at
www.nacci.org.
