Employers can expect the value of voluntary benefits to increase with the advent of health care reform in 2014, says Lockton’s Voluntary Benefits Northeast Practice Leader Steven Eisenberg.
While health reform law aims to limit private insurance plan cost-sharing charges, employees in employer-sponsored plans will still be responsible for deductibles, co-payments, and co-insurance with in network maximum out-of-pocket limits of $6,350 for individuals and $12,700 for families in 2014, as the non profit Center on Budget and Policy Priorities and others have pointed out.
Eisenberg sees this is an opportunity for employers to round out their plans with voluntary benefit offerings like critical illness and accident insurance, which reduce exposure to out-of-pocket expenses while providing a more personal approach to addressing the unique healthcare needs of employees and their families.
Critical Illness Insurance Policies
“Cancer studies estimate that Americans are surviving cancer and other critical illnesses at a rate of 67 percent, placing a renewed emphasis on surviving cancer in addition to preventing it in the first place. This, then, becomes a matter of reducing an employee’s financial exposure to this type of extreme health hardship, which continues to be the leading cause of bankruptcy in the United States,” says Eisenberg.
“Employees will max out their medical plan in such instances, facing up to $12,000 or more in out-of-pocket medical expenses, and there are three ways they can pay the bill: They can pay all at once, in which case they’ll destroy the capital as well as its potential investment value; they can take out a loan, in which case they’ll pay interest on top of the principal; or they can invest in voluntary benefits insurance, which makes the most financial sense, especially for employees with a family history of cancer, heart attacks, stroke, organ failure and Alzheimer’s,” Eisenberg explains.
“Critical illness insurance is designed to make a lump sum of $5,000 to $20,000 immediately available in such situations. It requires only a minimal investment each week from employees in employer-sponsored plans, can be made available on a guaranteed basis and is usually administered through the convenience of payroll deductions,” he adds.
Accident Insurance Policies
Accident insurance is another way employers might look to mitigate employee out-of-pocket expenses, especially in the case of high deductible plans. Eisenberg cites the hypothetical case of an injured teenager during a soccer game to illustrate the point:
“If an employee has a $2,500 deductible, he may be looking at $400 for the ambulance or $1,500 in the case of an air ambulance; then $75 for the emergency room; $75 for the doctor’s diagnosis; $1,000 if an overnight stay is required and $200 per night thereafter. But accident insurance—again, for a modest investment each month—can reduce or eliminate this out-of-pocket expense. What’s more, the employee in this scenario would be paid even if he had already satisfied his deductible, since accident insurance is an individual voluntary policy.”
Eisenberg concludes: “Financial hardship has a direct impact on the productivity and engagement levels of employees, but proactive employers will find many ways to mitigate such instances with a strategic mix of voluntary benefits offerings.”
What are your thoughts? Do you agree? Feel free to reach out with any questions or if you need assistance at RRuotolo@Lockton.com.
For more on this topic you can read my related post on employee satisfaction level increases from voluntary benefits.