Tag Archives: health insurance

Tap Dancing With Short-Term Medical Insurance

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By Cathy Miller, Business Writer

With no magic bullet for the health care crisis, insurance agents still need solutions for their clients. Clients are losing jobs, premium rates keep going up and agents are tap dancing to keep clients happy. One possible solution is short-term medical insurance.

Through short-term medical insurance, insureds receive coverage for a short period of time for catastrophic illnesses or accidents. Depending on the state, policies range from 30 days to 12 months. This type of insurance is a temporary answer for life events where clients are without health insurance. It can also provide an additional prospect resource for agents.

Tapping Into Another Market

So, who are good candidates for short-term medical insurance? Here are a few examples:

  • Students coming off their parents’ health insurance
  • Recent college graduates looking for employment
  • Individuals between jobs
  • Unemployed workers who cannot afford COBRA premiums
  • Employees in a waiting period for their new employer’s plan
  • Part-time or seasonal employees without benefits

Premiums for short-term medical insurance can be 30 to 40 percent less expensive than individual insurance premiums. Savings may be even greater when comparing premiums to COBRA rates. Typically, there is also much less paperwork and review time for short-term medical insurance.

As noted in a previous post, young adults (age 25 to 34), are the most likely to be uninsured. Recent graduates coming off their parents’ health insurance may be a good market for the short-term medical insurance policy. So, too, are COBRA participants exploring a less expensive alternative.

Advantages and Disadvantages

This insurance product fills an immediate need. It is not a permanent solution to health care. Here are some of the advantages and disadvantages of short-term medical insurance.

Advantages
  • Lower cost than more comprehensive health insurance
  • Usually effective within 24 hours of submission of application
  • Provides safety net for catastrophic illnesses/accidents
  • Depending on policy, may be able to renew, usually up to 36 months
Disadvantages
  • Pre-existing conditions are not covered
    *Note: renewing the policy is viewed as a new policy so conditions incurred during the first policy will be considered pre-existing conditions.
  • Short-term medical policies are exempt from HIPAA. This means insurance carriers do not have to guarantee renewability, guarantee issue or waive the pre-existing condition limitation federally eligible individuals.
    Note: Short-term medical insurance coverage does qualify as creditable coverage
  • Typically does not cover maternity, preventive care, physicals or immunizations

Short-term medical insurance is not a permanent solution, but it may be a viable alternative for clients and an untapped market for insurance agents.

Cathy Miller, Business Writer/Consultant has over 30 years of professional writing with a specialty in health care, employee benefits and wellness. Cathy also has an active Life/Accident/Health insurance license. Visit Cathy at her business writing blog, Simply stated business to Keep it simple, clear & uniquely yours.

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A Case for Critical Illness Insurance

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Study quantifies the risks for critical illness

By Cathy Miller, Business Writer

The age group with the highest percentage of individuals with no insurance is also the most likely to have a critical illness before age 65. That’s according to a recent study published by the American Association for Critical Illness Insurance (AACII).

Study Findings

Prepared by Milliman, Inc., the study reported the likelihood of men and women under age 65 of suffering a critical illness before the age of 65. The following highlights key findings:

  • 25-year-old male – Non-smoking: 24% chance; Smoking: 49% chance
  • 25-year-old female – Non-smoking: 21% chance; Smoking: 36% chance
  • 35-year-old male – Non-smoking: 24% chance; Smoking: 49% chance
  • 35-year-old female – Non-smoking: 21% chance; Smoking: 35% chance

For purposes of the study, the definition of critical illness was life-threatening cancer, heart attack and stroke. Most critical illness insurance policies cover those same illnesses.

Why Critical Illness Insurance

The first critical illness insurance policy sold in the U.S. was in 1996. AACII reports that today approximately 600,000 individuals have critical illness insurance policies. Recently, there has been a resurgence in sales for this type of insurance. There are a number of reasons for the increased popularity of this insurance product.

  • Advances in medical treatment increase the likelihood of surviving a critical illness
  • The high cost of recovery drains savings
  • Out-of-pocket costs are not covered by health insurance

Another strategy gaining popularity for critical illness insurance is their use as a supplement to a Health Savings Account (HSA). Critical illness insurance pays a tax-free, lump-sum cash benefit for covered illnesses. The benefit helps defray the out-of-pocket expense of the high deductible associated with HSAs.   

How the covered individual uses the cash benefit is totally up to the individual. Surviving a critical illness has a high cost. Rehabilitation, caregivers, expenses not covered by health insurance all add to the financial strain for the survivor and his or her family.

How Critical Illness Insurance Works

Offered to groups and individuals, critical illness insurance helps fill the gap between traditional health insurance and the out-of-pocket expenses incurred from a critical illness.

Originally, most of these policies covered three critical illnesses: cancer, heart attack and stroke. Many agents think of critical illness insurance as cancer insurance. Cancer insurance is still available but the coverage is for a cancer diagnosis only.

Today, many policies expanded the covered illnesses beyond cancer, heart attack and stroke to include coronary artery (bypass) surgery, kidney failure, major organ transplant, paralysis, loss of sight, multiple sclerosis, heart valve replacement and surgery of the aorta.

It is important for agents to understand the coverage for critical illness insurance. When first introduced, misunderstandings regarding pre-existing conditions, survival periods and reoccurrence of diseases left some very unhappy clients.

Common characteristics include:

  • Considered an accident and sickness policy
  • Coverage for most range from $10,000 to $50,000 (lower and higher coverage available)
  • Rates are generally guaranteed from three to five years
  • Pays a lump-sum, tax-free cash payment
  • May be tax deductible for businesses (for example, when purchased for key executive)
  • Typically has a guaranteed issue for group policies
  • Contain a survival period – number of days insured must survive following diagnosis to receive benefit
  • May have an option for return of premium that pays to survivors if the insured dies while the policy is in effect and no claim is made (for example, the insured dies during the survival period)

Insurance carriers recognize the increasing popularity of critical illness insurance. As a result, many of the newer products are more flexible than older policies. New features include a benefit for recurring illnesses and incentives for preventive and wellness treatments.

Critical illness insurance is often a good supplement to health, disability and life insurance for clients. Insurance agents benefit from understanding this insurance product in developing protection strategy for their clients.

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Corks Went Flying With Extension of COBRA Subsidy

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By Cathy Miller, Business Writer

In a previous post, we were watching the clock run out on the federal subsidy for COBRA coverage. In the nick of time, Congress approved an extension on the original December 31 deadline. A report from Hewitt Associates released immediately after the extension illustrates the impact of the subsidy.

Show Me the Money

Prior to the subsidy, eligible terminated workers paid the full COBRA premium – plus an administrative fee – to continue coverage under their former employer’s health plan. With the original legislation, eligible individuals received a 65% federal subsidy for nine months. Their COBRA eligibility had to start by December 31. Without an extension, many faced huge increases in what they paid for COBRA coverage.

The new bill from Congress made two changes to the original COBRA subsidy. First, it extended the eligibility period to individuals who lose their job to no later than February 28, 2010. Second, instead of the original nine months, the federal subsidy now continues for 15 months.

As a recent publication from the Kaiser Family Foundation shows, the subsidy makes a big difference in the average cost of coverage for individuals and families. For an unemployed worker, the extra savings is a welcomed relief.

Enrollment’s Up

Since the introduction of the original subsidy in March 2009, the Hewitt report shows a 20 percent increase in COBRA enrollment. The study looked at enrollment for 200 large employers with eight million employees. Between March 2009 and November 2009, 39 percent of those eligible for the subsidy enrolled in COBRA, as compared to 19 percent who enrolled between September 2008 and February 2009. The report showed some interesting industry-specific results.

The industries with the largest overall increase in COBRA enrollment were:

  • Industrial Manufacturing – from 7% to 67%
  • Aerospace & Defense – from 30% to 63%
  • Pharmaceuticals – from 20% to 44%
  • Media – from 13% to 36%
  • Business Services from 20% to 42%

The Insurance industry enrollment increased from 23% to 40%.

A New Clock Ticking

For insurance agents’ clients that either dropped coverage or paid full premiums, there are important new deadlines and provisions. The following describes some of the provisions for those caught in the transition.

  • Individuals who received full nine months of subsidy – are eligible for the full 15 months (an additional six months) provided they pay all of the reduced premium amount within 60 days of the enactment of the extension – or – within 30 days of being notified of the extension (whichever is later)
  • Individuals who paid full COBRA premium – after receiving the nine months of subsidy, receive a refund for the amount overpaid – or – can have that amount applied to future premiums. No timeline was set for reimbursement; however, agents should instruct clients to contact their COBRA administrator.

The subsidy is a band-aid that creates a temporary fix for maintaining health insurance coverage in these tough economic times. More than ever, clients need the sound advice and industry knowledge their insurance agent can provide. Additional subsidy information is available at the Department of Labor’s website at dol.gov.

Cathy Miller, Business Writer/Consultant has over 30 years of professional writing with a specialty in health care, employee benefits and wellness. Cathy also has an active Life/Accident/Health insurance license. Visit Cathy at her business writing blog, Simply stated business to Keep it simple, clear & uniquely yours.

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Senate Health Bill Curbs Cadillac Health Plans

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By Cathy Miller, Business Writer

While representatives from the House and Senate work on merging their two health care reform bills, one major sticking point is the Senate’s proposed tax on “Cadillac” health plans. Supporters view the proposed tax as vital to controlling health care costs. Opponents include House members that proposed an income tax on high earners as an alternative for paying for health care reform. The strong opposition of labor unions is behind a scheduled meeting this week between the President and union leaders who oppose the tax.

What Makes a Cadillac

Health plans with high premiums are what create a Cadillac health plan. Specifically, the senate bill defines the high-premium plans as those with a total cost of $8,500 or more for individuals and $23,000 or more for a family. Included are total premium costs for health and dental benefits and total contributions (employer and employee) to flexible spending accounts (FSAs) or health saving accounts (HSAs). The bill proposes a 40% excise tax on the amount over those individual or family costs.

Typically, plans with high premiums have lower deductibles, lower copayments and higher benefit levels; thus, the name “Cadillac.” Opponents of the bill argue, however, that there are other reasons for higher premiums, such as the demographics in a group plan. Groups with older employees or employees with ongoing health issues generally have higher premiums.

Unions Assemble Opposition

According to the October 2009 Notes issue of Employee Benefit Research Institute (EBRI), union workers are much more likely to have employer-sponsored benefits (83%) than non-union members (58%). Union leaders see a threat to their long-fought battle for better benefits that they say were in lieu of higher wages. They contend the tax will not hurt the intended target of high-paid executives as much as it will older workers and employees of small companies. Since health care costs outpace inflation, opponents of the excise tax warn of an increasing number of employer-sponsored plans qualifying as Cadillac health plans.

Early reports indicate resistance from the administration to back off on the excise tax. Union representatives hope for a compromise with, at a minimum, a higher limit for qualification as a Cadillac health plan.

Employers Bracing for Change

Although the excise tax is on insurers, at least some of the costs are likely to be passed on to the employer. Other employers self-insure their health plans in which an excise tax would directly impact the employer.

According to a recent Mercer analysis of 3,000 employers, up to 19% of the health plans would qualify as a Cadillac health plan when the tax goes into effect in 2013. Employers predict future changes to their health plans to avoid the tax. Possible fallout includes the elimination of contributions to FSAs, HSAs or termination of dental plans.

In addition to employers and union members, insurers and agents watch not only the President’s meeting on this issue but the entire health care debate. It is far from being over.