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Supplemental Health Insurance:
A ‘Must’ for Americans in the Current Economy

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Conseco White Paper

  1. 1. [ 01.22.2009 ] Supplemental Health Insurance: A ‘Must’ for Americans in the Current Economy By Ryan Berry, Connie Burgess and Kate Nelson Introduction Risk of Illness and Injury Economic concerns in the United States Many of us, at one point, will hear Introduction today are as numerous as they are seri- from our physician the words we fear 1 ous. National debt, falling stock prices, the most: Cancer. Heart disease. Stroke. record home foreclosures, a weak U.S. Those who don’t may have to support a Risk of Illness dollar and a negative savings rate have family member or good friend through and Injury come together to create a “perfect treatment for one of these diseases. 1 storm” in our economy. According to an Eastbridge Consulting High Cost Americans are struggling to manage Group study, in a typical year 1-in-6 of Medical Care their family economies. Many are battling Americans is hospitalized due to sickness 2 stagnant wages, overwhelming mortgage or accidents.2 The average hospital stay Who Bears the Burden? debt, crippling credit card debt and is four to five days in length, including unpaid medical bills. hospitalizations for everything from 2 minor broken bones to major organ Implications Medical debt is, in fact, a leading cause transplants.3 of personal bankruptcies in the U.S. today.1 3 Medical care from hospitals and other Sensible solutions are needed to help A Solution providers is more extensive when certain 4 consumers control their health care health conditions—namely injuries, heart expenditures and protect their hard- Buyers’ Guide to disease, stroke and cancer—occur. earned assets now and in the long term. Supplemental Insurance Injuries 4 Supplemental health insurance is a The National Safety Council reports practical solution. Due to the risk of Summary that a disabling injury occurs once incurring illnesses or injuries, and the every 1.6 seconds in the U.S.4 Nearly 5 high cost of medical care, the protection 2-in-3 disabling injuries among afforded by these products has never been American workers occur off the job, more important to American families. and therefore are not covered by workers’ compensation.5 Heart disease According to the American Heart Asso- ciation and American Stroke Association, about 80.7 million Americans currently have cardiovascular disease.6 Even the CIC-WP-EC (01/09) 132471 © 2009 Conseco Services, L.L.C. 1
  2. 2. [ 01.22.2009 ] Supplemental Health Insurance: A ‘Must’ for Americans in the Current Economy most extreme heart-care scenario—a is $14,000 for an adult.12 Another 21% heart transplant—is becoming more of health care expenditures goes toward common. There were 2,192 heart trans- physician and clinical services.13 plants performed in the United States in When most people think about the high 2006 and 2,125 in 2005.7 cost of health care in the U.S., they imagine Cancer expensive hospital stays and pricey “Cancer” is the word patients fear hearing. doctor bills. Yet these costs represent As the average life span of Americans has just half of the individual’s total poten- increased, so has the risk of developing tial health care liability. A nearly equal The American cancer. The American Cancer Society amount goes toward additional medical Cancer Society reports reports that men have nearly a 1-in-2 and nonmedical expenditures related men have nearly a lifetime risk of developing cancer, while to care.14 These nonmedical costs are 1-in-3 women likely will develop cancer harder to anticipate. Most people aren’t 1-in-2 lifetime risk at some point in their lives.8 In 2008 prepared for costs such as transportation of developing cancer, alone, more than 1.4 million new cases to and from medical facilities, lost wages while 1-in-3 women of cancer are expected to be diagnosed.9 from extra sick days and additional child or family care expenses. likely will develop Given the prevalence of accidents and cancer at some point injuries, as well as catastrophic illnesses Who Bears the Burden? like heart disease and cancer, individuals in their lives.8 As health care costs have increased, so have are right to be concerned about their health insurance premiums. From 2002 to personal health risks and the costs 2007, health premiums grew 78%.15 associated with treatment and recovery. America’s employers are facing rising High Cost of Medical Care costs for insurance and total benefits— Health care spending has consistently while they struggle to remain profitable grown faster than the overall economy in a difficult economy. In response, since the 1960s. In 2007, spending on they’re reducing operating expenses health care was about 16.2% of the by cutting benefits and eliminating U.S. GDP.10 employee benefit options—leaving their workers responsible for a greater share The largest chunk of overall health care of insurance costs. Nearly 3.7 million expenditures—nearly 31%—goes to pay fewer people had employer-provided hospital costs.11 That’s not surprising insurance in 2004 than in 2000.16 In considering that the average per-patient 2007, the percentage of people covered amount charged by U.S. hospitals by employer-funded health insurance fell (which includes care for everything from for the fourth year in a row.17 stitched-up cuts to open-heart surgery) CIC-WP-EC (01/09) 132471 © 2009 Conseco Services, L.L.C. 2
  3. 3. [ 01.22.2009 ] Supplemental Health Insurance: A ‘Must’ for Americans in the Current Economy As shown below,18 due to reductions in 29% reported that medical expenses employer-provided benefits, individuals contributed to their current level of credit are paying higher out-of-pocket costs for card debt.23 medical care, including premium expenses, Not surprisingly, about half of all copays, coinsurance and more.19 Among low- and personal bankruptcies are attributed in 2004 2006 part to medical problems.24 middle-income house- Increased copays 38% 44% In an attempt to reduce household ex- holds with credit card penses, more Americans are making poor debt, 29% reported Increased 25% 37% health care decisions. In an October 2008 deductibles that medical expenses study by the Kaiser Family Foundation, Decreased contributed to their 12% 13% 31% of surveyed respondents said they coverage levels skipped recommended medical tests or current level of credit Fewer plan treatments to save money.25 10% 9% card debt.25 options This problem is even more marked in Implications rural areas. In small towns and sparsely In an October 2008 Many Americans are struggling to make populated communities, residents are more likely to suffer certain types of study by the Kaiser ends meet. The last thing they need is an illness or injury to further stress their chronic conditions, such as diabetes,26 Family Foundation, 31% and are more likely to die from heart resources, especially when so many are of survey respondents battling personal debt. disease.27 said they skipped After adjusting for inflation, the Because they tend to have fewer options recommended medical indebtedness of U.S. households has risen of health care providers—and often must travel some distance to receive quality tests or treatments to 42% over the last five years alone.20 As a result, families are more vulnerable to care—people in rural areas are less likely save money.26 financial difficulty and a deteriorating to seek regular preventive care. As a quality of life if an injury or illness occurs. result, they are more likely diagnosed with a major illness requiring advanced One-third of Americans report they have treatment.28 had problems paying medical bills in the past year, up from about one-quarter of the population two years ago.21 Between 2000 and 2003, family health costs rose about 45%.22 Among low- and middle- income households with credit card debt, CIC-WP-EC (01/09) 132471 © 2009 Conseco Services, L.L.C. 3
  4. 4. [ 01.22.2009 ] Supplemental Health Insurance: A ‘Must’ for Americans in the Current Economy A Solution Buyers’ Guide American families have a choice: They to Supplemental Insurance can be victims of circumstance, or they An individual in the market for supple- can find solutions that can help them mental health insurance should look for: maintain their standard of living in the event of a major illness or accident. • Lump-sum benefits, which are paid Supplemental health insurance is a viable when the consumer is diagnosed with a solution, providing policyholders the common catastrophic illness. American families financial assistance to pay bills and main- EXAMPLE: A supplemental cancer have a choice: They tain their household’s solvency through plan would pay an insured single can be victims of periods of illness. mother a $10,000 cash benefit if she were diagnosed with breast cancer. circumstance, or they Cheaper than fast food? Health insurance is more affordable than • Indemnity benefits, which offset can find solutions you might think. While premiums vary, medical costs associated with hospital that can help them the average annual cost of supplemental and ICU stays, chemotherapy, radiation maintain their standard health insurance is on par with many and corrective or preventive surgery. non-essential expenses people willingly of living in the event EXAMPLE: An insured factory incur on a regular basis. worker who is hospitalized with an of a major illness or appendectomy could use his daily $200 accident. Supplemental COMPARE THE COST: hospitalization benefit to help pay for health insurance is a expenses associated with a stay in the Two lattes a week for one year $442 viable solution. hospital. This could eliminate the Going to a movie twice a possibility of using his hard-earned month with your spouse— $670 savings as a safety net. including popcorn and sodas • Transportation benefits, which help Two fast-food meals a week insured persons cover the cost of $725 for one year travel to and from a medical center for treatment. This benefit is especially Half a pack of cigarettes a day $820 important for those who live in rural areas, where transportation and lodging expenses typically accompany medical care and treatment procedures. EXAMPLE: The parents of an insured nine-year-old child who must travel 350 miles to receive specialized treatment could use their plan’s transportation benefit to offset the cost of travel and overnight stays. CIC-WP-EC (01/09) 132471 © 2009 Conseco Services, L.L.C. 4
  5. 5. [ 01.22.2009 ] Supplemental Health Insurance: A ‘Must’ for Americans in the Current Economy • Coverage for regular diagnostic tests, this coverage for the extra insurance on such as mammograms, Pap smears top of our military and work benefits and colon screenings. This option because cancer is terribly expensive. makes it easier to afford preventive care The return-of-premium feature made it and detect any disease when it’s easiest a win-win situation,” she stated. “The to treat. following year during a mammogram, EXAMPLE: A 44-year-old mother has I was told of a lump. They removed a family history of breast cancer, so she 25 lymph nodes and performed a mastectomy. Now I have been taking By having the purchased a supplemental cancer policy with wellness benefits. Her coverage cancer medication for several years. financial “safety net” pays for an annual mammogram, Conseco has paid directly to us and the of supplemental which provides assurance that any money has helped—so we have had no out-of-pocket expenses.” health insurance, more cancerous cells likely will be detected at an early stage. Americans can avoid Summary the too-common • Premium-return feature, also known as By having the financial “safety net” of a “cash value” or “return of premium” circumstance of having supplemental health insurance, more rider. As the name implies, this benefit people can avoid the too-common to choose between can return premium to the policyholder circumstance of having to choose obtaining needed if coverage is kept for a certain period between obtaining needed medical of time. It gives the buyer assurance medical care and care and paying necessary household that they will get their premiums expenses. Supplemental health insurance paying necessary returned to them if the insurance protects against the potentially high household expenses. coverage is not needed. personal costs of an accident or major EXAMPLE: A couple in their 60s illness, and its cost is comparable with have had their supplemental cancer common househould expenses. insurance for 20 years. They bought their policy with a 100% return of With most supplemental plans, benefits premium rider attached. Because they are paid directly to insureds or their haven’t had to file a claim, they recently beneficiaries, giving them the freedom received a check for their entire paid to use their insurance benefits however premium and decided to continue they choose. Benefits from supplemental their coverage. policies are paid regardless of any other insurance already in place, including Delores Shileny of New Hampton, employer-sponsored major medical, for Iowa can attest to the value of extra assurance. supplemental coverage with the premium-return feature. “We took out CIC-WP-EC (01/09) 132471 © 2009 Conseco Services, L.L.C. 5
  6. 6. [ 01.22.2009 ] Supplemental Health Insurance: A ‘Must’ for Americans in the Current Economy Ardel Fugleberg and her husband, the many nonmedical costs so they can Randy, of Hope, North Dakota, thought focus on their health. to supplement their major medical Now more than ever—in a climate insurance with a cancer plan—and marked by an unstable economy, rising they’re glad they did. medical costs and increasing personal “We always think it would only happen health care expenses—individuals should to others, but in a split second many lives take steps to protect themselves and “Having our Conseco are changed with a diagnosis of cancer,” their families with supplemental health Fugleberg stated. “Having our Conseco insurance products. cancer insurance cancer insurance helped with many of helped with many those additional financial concerns. Even of those additional with medical insurance, the expenses added up quickly. It helped with lodging financial concerns… and travel expenses at a time when many References with the illness and 1 “Illness and Injury as Contributors to family members had to take off from Bankruptcy,” Market Watch: Health Affairs, transplant, almost work. With the illness and transplant, Feb. 2, 2005. almost a year of work was missed to help 2 “Voluntary Supplemental Medical and a year of work was Hospital Indemnity Plans,” Eastbridge with his care. Our agent was very helpful Consulting Group, Inc., p. 15. missed to help with and really worked hard for us when we 3 Ibid., p. 15 his care. Our agent were going through the worst time of 4 National Safety Council: Report on Injuries our lives.” in America, 2003. was very helpful and 5 Ibid. really worked hard People like the Fuglebergs made the 6 American Heart Association/American choice to protect their own health Stroke Association, Heart Disease and for us when we were and their finances by purchasing Stroke Statistics, 2008 Update (At-a-Glance Version), p. 6. going through the supplemental cancer insurance. They are 7 Ibid., p. 35. worst time of among thousands each year who receive 8 American Cancer Society, Cancer Facts & cash benefits to help offset the cost of Figures 2008, 2008, p. 1. our lives.” life-saving care. In fact, in 2007, Conseco 9 Ibid., p. 1. Insurance Company—a national insurer 10 “Trends in Health Care Costs and based in Carmel, Indiana—paid out Spending,” Kaiser Family Foundation, Sept. 2007. more than $85 million in medical claims 11 Ibid. related to cancer care and treatment. 12 “Voluntary Supplemental Medical and Hospital Indemnity Plans,” Eastbridge Supplemental health insurance products Consulting Group, Inc., p. 15. pay lump-sum and/or indemnity benefits. 13 “Trends in Health Care Costs and These benefits are flexible enough to Spending,” Kaiser Family Foundation, Sept. 2007. be used however the insured person 14 Ibid. chooses—to pay medical bills through a 15 Ibid. lengthy course of treatment or to cover CIC-WP-EC (01/09) 132471 © 2009 Conseco Services, L.L.C. 6
  7. 7. [ 01.22.2009 ] 16 Mishel, Lawrence, et. al., “Less Cash in Their Pockets,” EPI Briefing Paper #154, The benefits described in these policies do 2004. not cover all nonmedical expenses. However, 17 Ibid. the benefit payment you receive can be used 18 “Worksite MarketVision – The Employee to pay any of your medical or nonmedical Viewpoint Revisited,” Eastbridge costs not paid by any other insurance. Consulting Group, Inc., May 2007. These policies have limitations and 19 Watson Wyatt survey as presented at the exclusions. For costs and complete details Eighth Annual Washington Business Group of coverage, contact an agent. Certain policy on Health Summit. benefits, riders and features may vary by state. 20 “Flow of Funds Accounts, Balance Sheet A hospital is not a bed, unit or facility that Tables: Total Household Liabilities,” functions as a skilled nursing facility; a Federal Reserve, 2006. Deflated using nursing home; an extended care facility; a CPI-U from the Bureau of Labor Statistics. convelescent home; a rest home or a home 21 “Kaiser Health Tracking Poll: Election for the aged; a sanatorium; a rehabilitation 2008–October 2008.” center; a place primarily for providing care 22 Mishel, Lawrence, et. al., “Less Cash in for alcoholics or drug addicts; or a facility Their Pockets,” EPI Briefing Paper #154, for the care and treatment of mental disease 2004. or mental disorders. 23 “Borrowing to Stay Healthy: How Credit The facts in this document represent the Card Debt Is Related to Medical Expenses,” U.S. population, are for information only, Demos: A Network for Ideas and Action as and do not imply coverage under the policies Part of the Access Project, Jan. 2007. or endorsement of the companies or policies 24 Ibid. by the cited sources. 25 “Kaiser Health Tracking Poll: Election 2008.” Products cited in this article are issued by 26 National Center for Health Statistics. Conseco Insurance Company, a life and health Health, United States, 2001, With Urban insurance company, and Conseco Health and Rural Chartbook. Hyattsville, Insurance Company, administrative offices, Maryland: 2001. Carmel, IN. These policies and certain benefits 27 and/or riders are subject to state availability. Ibid. 28 Casey, M. M., Call, K. T., & Klinger, J. M. (2001). Are Rural Residents Less Likely to Obtain Recommended Preventive Health Care Services? American Journal of Preventive Medicine, 21(3), 182-188; and Zhang, P., Tao, G., & Irwin, K. L. (2000). Utilization of Preventive Medical Services in the United States: A Comparison Between Rural and Urban Populations. The Journal of Rural Health, 16, 349-356. CIC-WP-EC (01/09) 132471 © 2009 Conseco Services, L.L.C. 7