Understanding Critical Illness Insurance Facts and Costs: A Look at Cancer

Imagine beating cancer, only to be then saddled with lingering medical debt.

That’s the scenario up to 1 in 3 cancer survivors face, according to a 2017 report from the American Cancer Society (ACS). Combined with the opportunity costs of missing work, medical expenses add up fast — and can leave a lasting financial impact in their wake.

This is why it’s important for you and your employees to be familiar with critical illness insurance facts and costs. Here’s what to know.

Critical Illness Insurance 101

As a supplemental plan, this insurance pays out lump-sum benefits for designated health events, including cancer, stroke or heart disease. It complements a traditional health insurance plan rather than replacing one. Because of this, the premiums can be quite low — some under $10 a month.

The size of those lump sums varies based on the illness, but regardless, the money goes to the same place: the patient, not the provider. Some policies issue up to $20,000 or more for a cancer diagnosis. Once the money reaches a patient’s account, they can use it for whatever they need, be it medical bills or rent.

Understanding the Need for Extra Protection

Should employees purchase critical injury insurance? Some employees may forgo getting a plan, thinking the extra protection is unnecessary.

Statistics say otherwise: About 1 in 2 men, and about 1 in 3 women, will be diagnosed with some form of cancer during their lifetime, says the ACS. And assessing individual risk involves much more than knowing whether a close family member has had the disease.

Though many cancers are highly survivable with modern medicine, patients still leave the care journey with bills on top of potential emotional trauma and ongoing health needs. If they have a high-deductible health plan, their cost-sharing obligations can be even bigger.

During those times, getting a check in the mail for thousands of dollars can help a great deal — but for the most part, that depends on your employees purchasing the plan before getting diagnosed.

The best time to enroll in a plan is before you need it. So how can you help employees consider whether a critical illness plan is right for them?

Helping Employees Navigate Their Plan Choices

Your employees have a seriously long list of options to review as they make benefit selections, from supplemental plans like critical illness, accident, and hospital indemnity insurance to medical, vision, dental and disability. To help them choose the right mix — including evaluating whether critical illness insurance meets their needs — try these strategies.

1. Encourage Them to Evaluate Their Unique Risks

A person’s likelihood of getting a chronic disease depends on many factors. For example, some cancer risk factors are hereditary, while others stem from lifestyle habits (such as an unhealthy diet, lack of exercise, or smoking), the environment (such as exposure to the sun) and infectious diseases (such as HPV). Though based in the U.K., this cancer risk calculator is a good place to learn about individual cancer risk.

2. Help Them Predict the Costs of Medical Care

When evaluating whether they can afford a supplemental premium, employees should consider how it compares to the size of medical costs. For example, a lung cancer diagnosis can exceed $200,000, according to the ACS report — and while medical insurance is likely to cover most of that, patients still have to pay out-of-pocket expenses like deductibles, copays, coinsurance and potentially even out-of-network care. In 2020, out-of-pocket costs can reach $16,300 for a family.

That exceeds the median amount Americans have in savings by about $4,500, which means a major health event like cancer would not only wipe out those savings but leave many employees in debt for thousands more. And come January, their deductible would reset back to zero. All of this can expose your employees to massive cost risks, and depending on their financial situation, it could make a supplemental plan all the more necessary.

3. Explain the Fine Print

Coverage can vary quite a bit between underwritten and guaranteed issue plans, which means that not all policies will meet all employees’ needs. For example, here are a few points to consider:

  • Supplemental policies like critical illness insurance are not required to comply with the Affordable Care Act. Not all of them may cover preexisting conditions — or they may have a waiting period of a few months after purchase.
  • Underwritten plans may require a more extensive family history or additional lab testing.
  • Some policies may require higher premiums for smokers or those who have other unhealthy habits.
  • Nearly all critical illness policies exclude illnesses that result from self-harm, alcohol use or drug abuse.

Provide Education, But Don’t Push

Only your employees know their complete financial and medical picture, so it’s up to them to determine whether a critical illness plan makes sense. Still, misinformation can circulate about supplemental plans. By providing clarity around critical illness insurance facts and costs, you can fill knowledge gaps where policy shoppers might otherwise get confused.

Ultimately, it’s about helping your employees protect their finances against the uncertainty of medical costs. With an estimated 1.8 million new cancer cases expected in the U.S. in 2020 and many more cases of other chronic conditions predicted, you might employ someone who needs it sooner rather than later.

This content is provided solely for informational purposes. It is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax and/or other professional advisers.

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