In recent days, Cigna and Aflac have announced the roll out of group hospital indemnity benefits. The plans are intended to offer employees supplemental coverage for costs that major medical plans might not provide, but experts say adviser help is crucial for employee understanding and engagement with the new offerings.
Cigna said Monday its new group hospital indemnity insurance policy, called Cigna Hospital Care, will be available in April and provide additional financial protection when an unexpected covered hospitalization occurs. Aflac said last week it launched its group hospital indemnity in 40 states throughout January. The product provides coverage for both routine medical care as well as catastrophic illnesses and accidents.
Both carriers’ plan offerings are designed to be flexible and can be customized by employers to meet the needs of their workforce. Both the carriers and advisers agree educating employees about how the plans work and what benefits they provide is imperative.
Nicholas Moriello, president and C.E.O. of Health Insurance Associates out of Delaware says his experience with indemnity policies is that they seem to work conceptually, but employee confusion about how the benefits work in conjunction with major medical insurance may hinder the plans from realizing their true potential.
“Indemnity policies are intended to allow individuals and families to purchase a larger deductible to save premium dollars on that policy, and then handle the deductible for many common larger medical bills with the indemnity policy,” Moriello says.
The policies his business has handled, in Delaware, Pennsylvania and Maryland, have not achieved this goal, he says.
“Adding the premiums for the indemnity plan plus the high deductible health plan together would be very close to simply purchasing a smaller deductible health plan,” Moriello says. “Additionally, for folks who do purchase large deductible plans that are eligible for health savings accounts, they don’t want to negate their ability to deposit into a health savings account, and some of the indemnity plans create a potential for ‘double dipping.’”
Jim Angstadt, public relations manager for Cigna, says there is a distinct difference between dollars from an HSA and coverage from Cigna’s indemnity plan, however.
“Although a customer could use HSA dollars to pay out-of-pocket medical expenses associated with a hospitalization claim, hospital indemnity benefits are distinct from an HSA plan because they provide insurance coverage rather than acting as a savings account,” says Angstadt.
Because deductibles and out-of-pocket expenses continue to grow higher in some employer’s plans, employees may not have the resources to fully fund their HSA to cover their full out-of-pocket exposure, and some employees may not fund their HSA accounts at all, Angstadt adds.
Aflac’s 2015 workforce report indicated that 52% of employees have less than $1,000 in their savings account to afford out-of-pocket expenses and 28% of employees have less than $500.
“If that’s all you have in your savings account, it’s very unlikely you will be funding an HSA because you need the money for other purposes,” says Daniel Lebish, C.O.O. of Aflac.
“Hospital indemnity can help [employees] cover their out-of-pocket exposure plus non-medical expenses that may not be eligible to be paid by an HSA, such as travel to and from treatment, hiring extra help with childcare, help with house or yard work during hospitalization,” says Angstadt.
“HSA’s, in essence, are the employee’s dollars,” Lebish said. “If I was a broker or adviser, I would ask the employer group or employees, ‘what can you afford to put into an HSA and what can you not afford, and what will you have left in savings to handle out-of-pocket expenses.’”
Unmet needs
The brokers Aflac has been working with have been seeking a plan that not only fills gaps in major medical plans, but is specific to pre-existing condition limitations that employees may struggle with on their current plan.
“If I was a broker or adviser, I would ask the employer group or employees, ‘what can you afford to put into an HSA and what can you not afford, and what will you have left in savings to handle out-of-pocket expenses.’"
Brokers have also been asking for benefits plans that have immediate coverage for newborn as well as no maximum or termination age.
“Our hospital indemnity plan actually fills all of those needs,” Lebish says. “As we compare our Group Hospital Indemnity Plan to other indemnity plans, we found it measures up very well.”
Brokers will need to counsel employer groups and the employees within those groups when they are faced with a high deductible plan to pursue hospital indemnity plans on top of their primary medical plan.
Lebish says a broker will be able to not only help the employer reduce costs for providing a health plan for their employees, but the indemnity plan will also allow the employee to not feel exposed to out-of-pocket payments should their hospitalization not fall under their major medical plan.
