Americans unprepared for financial impact of accidents, critical illness
There are certain things we don’t like to think about. Death, serious accidents and critical illnesses are likely near the top of everyone’s lists. While one is inevitable, many bury their heads in the sand when considering accidents and critical illnesses.
Most would say: “I’m safety conscious.” “I’ll take my chances.” “I take good care of myself and am very healthy.”
These and similar thoughts might be comforting, but what if? Accidents happen, and critical illnesses can afflict even the youngest and healthiest among us. Further, the shift toward increased employee responsibility for health care costs through consumer-directed and high-deductible plans can lead to gaps in medical and disability coverage, leaving employees unprepared for large out-of-pocket costs. Lost income is another major issue.
Out-of-pocket costs relating to an accident can be as high as $4,112; uncovered costs for a critical illness can total $14,444, according to the MetLife Accident and Critical Illness Impact Study. Moreover, the same study found that lost income due to accidents and critical illnesses could be as high as $26,900 and $50,600, respectively.
Such costs understandably can wreak financial havoc atop the physical and emotional distress of an accident or major illness. Employees and employers alike can benefit greatly from voluntary insurance solutions that cover often overlooked costs, including co-pays, transportation to treatment centers, and child care.
The benefits for impacted employees are abundantly clear. For employers, offering such added protection employees need and want can improve satisfaction with benefits while fostering worker loyalty and retention. Indeed, six of 10 employees surveyed stated they would feel positive about their employers if they offered accident and/or critical illness insurance.
But as we know, most don’t even want to think about the possibility of an accident or critical illness. As more employers offer such supplemental coverage, educating their workers about its benefits and importance becomes key. Employees will open their wallets only when they fully understand the value and benefits of these offerings.
To implement, effectively communicate and maximize employees’ voluntary accident and critical illness insurance enrollment, employers must:
• Provide a variety of voluntary benefits;
• Raise employee awareness of the differences between traditional coverage and accident and critical illness insurance to combat confusion;
• Alert employees to real financial risks and how added coverage can cover unexpected costs.
As employers prepare for the 40 percent excise tax to be levied on high cost medical plans in 2018, some are considering moving toward consumer-driven health plans, by which employees determine how they want to manage risk when enrolling in a health plan.
A wide choice of voluntary benefits neatly dovetails into this scenario. And 59 percent of employees in the aforementioned study stated they would highly value a greater variety of benefits from which to choose. Sixty percent are willing to foot a greater share of health care costs in exchange for benefits that fit their needs.
Choice is paramount. For example, younger workers and those with children at home are more likely to value supplemental accident rather than illness coverage. Conversely, middle-aged employees and beyond will more often be drawn to illness coverage as events such as strokes and heart attacks become more commonplace. Offering both of these supplemental insurance options further increases worker loyalty, given instances of a younger employee’s family history of serious illness and active older employee participation in risky sports activities, to cite a few examples.
The point is that accident and critical illness insurance helps to address gaps left by existing coverage while meeting diverse protection needs.
Employers also must take the necessary steps to educate workers on the differences between traditional and supplemental products not only to alleviate, but hopefully prevent any and all confusion.
Workers often mistakenly confuse accident and critical illness insurance with medical and disability insurance. This problem becomes more acute with CDHP plans, where consumers must be as up to speed as possible to wisely choose among options. Employee education must address how the variety of supplemental offerings complements traditional insurance to strengthen the overall safety net.
Carriers and brokers can greatly assist employers and employees by providing a host of communications tools and on-site expertise. When consumers are fully educated about accident and critical illness insurance, 76 percent and 74 percent of the study respondents, respectively, found these supplemental products appealing.
Finally, mere awareness of accident and critical illness offerings often isn’t enough to spur employees to action. We’ve all heard or made the same excuses or used the same rationale to justify forgoing insurance. While scare tactics are uncalled for, brokers and employers owe it to employees to provide a reality check.
Again, it cannot be stressed enough that existing medical insurance will not cover out-of-pocket expenses or high deductibles. Beyond co-pays, travel, childcare and household help, the impact of lost income can be financially devastating. Even long-term disability only covers up to 60 percent of lost income. Accident and critical illness insurance will bridge a gap in non-nest egg-depleting ways that savings, investments, enormous credit card balances and borrowing from friends and family cannot.
Employers that provide information that gives workers a clear and full appreciation of the true potential financial impact of an accident or critical illness provide a valuable, quality-of-life saving service. Armed with this knowledge, they can accurately and realistically determine if their rainy day funds and/or other financial resources are enough to see them through these unexpected challenges.
If not, the upfront cost of accident and critical illness insurance is a wise investment that will pay for itself many times over.