13 minute read
Voices Of Voluntary Benefits
Hospital Indemnity
By Michael Naumann, Reliance Matrix
This publication is titled “the Voluntary Benefits Voice” because our goal is to share the voices of voluntary benefits leaders from across the industry to help us grow both in our own practices from learning from one another, and also as an industry. We try to share insights from a diverse set of leaders and entities across the country in each edition and in that spirit, Michael Naumann, VB RPL at Reliance Matrix, has interviewed several VB leaders about the place for Hospital Indemnity plans in client strategies today, recommended improvements, and what sets carriers apart specific to Hospital Indemnity plans in the marketplace.
For this article, I'll be interviewing Jen Daker (Jen), Voluntary Benefits Leader, West with Mercer Health & Benefits; Whitney Ehret (Whitney), a Benefits Consultant and Director of Voluntary Benefits at Burnham Benefits, a Baldwin Risk Partner; Raymond Chan (Raymond), Managing Partner of Insurance Marketplace, LLC; John Hickey (John), Senior Vice President & Voluntary Benefits National Practice Leader of AssuredPartners; and Megan Stavros (Megan), Voluntary Benefits Consultant at Gallagher.
Where is the place for Hospital Indemnity insurance within client strategies today?
Jen: According to the Fed’s 2022 Economic WellBeing of U.S. Households Survey, one in four Americans lack the funds to cover a $400 emergency expense, and the average per-day cost of a hospital stay is $2,883, the equivalent of 504 hours of work for the average hourly employee. With higher deductibles and out-of-pocket exposure, a hospitalization, planned or un-planned, can place an employee and their family’s financial security at risk. At Mercer we are seeing client strategies focus increasingly on a hyper-personalized approach to employee benefits and the overall employee experience. Hospital Indemnity insurance allows employers the ability to offer an inexpensive financial safety-net that strategically aligns with their healthcare plan(s) and provides employees with the ability to customize their benefits based on their unique needs. Hospital Indemnity insurance is a vital component to an organization’s total reward strategy as it touches on several key themes important to both employers and employees: Physical & Mental Wellness, Financial Wellness, Talent Acquisition and Retention Strategies, Productivity and shows an employer’s commitment to Diversity, Equity, Inclusion and Belonging strategies by reducing barriers for underrepresented populations.
Whitney: The answer to this question shouldn’t be a secret to anyone in the employee benefits marketplace. Having a hospital indemnity plan as part of your employee benefits line-up is table steaks. As healthcare costs have continued to rise, employers are looking for creative ways to shift cost to employees, while still maintaining competitive benefits. Hospital Indemnity plans have become more flexible in the market and employers are able to match hospital admission benefits with that of the deductible strategy they are trying to achieve.
Raymond: For certain clients, these plans can help reduce the overall cost of medical insurance. Increasing the co-pay for hospital confinement on the medical plan can significantly reduce its premium allowing for total aggregate cost to be reduced. For employees that are concerned about hospitalizations, structuring these plans without preexisting condition limitations can be a great add-on. This however is a case-by-case scenario and really depends on how the medical underwriter adjusts premium while only changing the hospital co-pay amount.
John: There is still very much a need for hospital indemnity insurance for clients today. With the increase of deductibles and out-of-pocket maximums, a hospitalization can result in the biggest risk of spend for an employee. Especially when you consider that a family’s aggregate out of pocket expense on an HSA Plan can be as much as $15,000 With COVID-19 behind us, many employees recently witnessed the astronomical cost of intensive care and hospital expenses firsthand I personally saw as much as $800,000 during the peak of COVID for a hospitalization.
Megan: Hospital Indemnity plans can have a place for many different kind of employers. For example, employers who need to find cost savings can adjust their medical plan design, by increasing deductibles or out-of-pocket maximums, which will lower their overall premium spend. But they can help offset the increased out-of-pocket exposure to employees by adding a hospital indemnity plan, which will pay them a cash benefit for unexpected hospital visits. This allows the client to save money on medical spend, but also enhance their benefit offering by adding an additional plan that protects employees financially. Conversely, an employer who is not in need of cost savings, but instead wants to differentiate from their peers may offer a hospital indemnity plan as an employer paid benefit. The simplicity of hospital indemnity plans allow them to be applicable for many types of employers and employees – those who need it for financial protection or those who are proactively protecting their families.
What are your suggestions on creating more inclusive hospital plans?
Megan: We have seen voluntary benefit carriers come a long way in the last few years with their hospital indemnity plans. For example, carriers who used to intentionally exclude mental health and substance abuse visits from their plan are now including additional benefits for those suffering from behavioral health issues. Additionally, restrictions that used to be extremely prevalent in these plans, such as waiting periods and pre-existing conditions, are now being waived to allow for payment right away on benefits that historically may not have been covered. These changes have allowed hospital plans to be much more straight-forward and meaningful for a larger population of employees, which attribute to its enrollment growth over the last few years. If carriers can continue to expand coverage to include things like fertility or transgender benefits it will help to meet the growing needs of employers regarding their diversity and inclusion initiatives.
Jen: My recommendations for creating a more inclusive hospital indemnity plan centers around the contract basics. Are the premiums affordable? The top stressors for US workers are largely financial, with 35% living paycheck to paycheck. Removing barriers to receiving benefits, ie, waiting periods, preexisting condition limitations, onerous benefit qualification language, and purpose for admittance limitations. Does the policy allow hospitalization due to mental health and substance abuse? Providing coverage for time in the emergency room and/or observation and/or counting this time toward the hourly hospital admission requirement. Overstressed hospital systems have been unable to accommodate patients in a timely manner, which can be a result of lack of space and/or lack of specialty nurse or physician availability. Lastly, ensuring the language used in certificates, and employee communication material is gender neutral, inclusive of all family structures and free of complex jargon - the right language can reinforce an employer’s commitment to DEIB.
What would help to improve the Hospital plans available on the market today?
John: We need to see more coverage for substance abuse and mental illness admissions. Mental Health is a big part of our conversation today and most carriers are still adapting to this need. I would also like to see more benefits for the proper steerage. Employees should receive a larger benefit based on the quality and cost of care provided by the hospital. The employer should have buy-in with this, knowing employees are making the right decision based on platforms like Healthcare Bluebook.
Whitney: Over the last couple of years, we’ve seen a dramatic increase in the amount of conversations regarding mental health, but what are we actually doing about it? Having the conversation is certainly a start and better than not addressing it at all, but the insurance market has not caught up with this trend despite common misconceptions. I recently had a client that had an employee admitted to the hospital for a mental health reason, and the claim was denied on their hospital indemnity plan because mental health wasn’t covered. This is something you have to specifically check for in your hospital insurance policies or ask for as an added benefit. I would love to see inclusion of this type of coverage be adopted by all carriers in the space.
What can set a carrier apart when it comes to Hospital Indemnity insurance?
Megan: Carriers that can provide intuitive, or proactive, claims filing on behalf of the employee are starting to set themselves apart. This process solves for one of the biggest issues with voluntary benefits, which is an employee forgetting to file their claim. This additional step is very important because we want to make sure employees are receiving a payout for a benefit they pay for, at a time when they have unexpected expenses from a hospital visit and need it the most. Additionally, carriers who are expanding the definition of their eligible payouts for things like mental health, substance abuse, pregnancy or newborn benefits, and wellness claims are winning more opportunities because their benefit resonates with more employers and larger populations. The more we can design plans to meet employees where they are at in different life stages, while encouraging them to be good consumers of their health, the more valuable and essential voluntary benefits become.
Raymond: Having a thorough review of the medical plan options and pairing it with a hospital indemnity product where it includes benefits in areas of highest out-of-pocket expense. Adding more benefits to a hospital indemnity plan can jeopardize the pre-tax status of a HSA plan. An improvement would be for us as Benefit Advisers to make sure that the enrollment method can support plan-based restrictions on who can enroll in a hospital plan. Having a HSA compatible option paired with a non-HSA compatible option with all the bells and whistles would be the best approach. Mental health has also been of greater interest post pandemic. Ensuring that the carrier does not have exclusions for mental health will also make the product more desirable.
Raymond: Full claims integration would be great however I believe there are too many technology/security/compliance hurdles that need to be overcome before it can be seen as a benefit. Not all enrollment platforms and methods can support capturing the authorization to disclose information for claims. The next iteration would be to see full claims integration where a claim on medical insurance also triggers all benefits payable on the hospital indemnity plan, I would not discount the integrations that are available now but there is a ton of room for improvement with technology.
John: Fortunately but unfortunately it’s a race to zero with premiums. However, the lower cost plans don’t cover as much when it comes to benefit and we really want to make sure the plan pays for what the employee is needing. As mentioned before, I would also love to see more mental health coverage on these plans. If carriers could assist with steerage and reward for good behavior, employers would have more buy in.
Jen: Some of the things I am most excited to see introduced center around heath equity in underrepresented groups and family focused benefits. In 2021 the maternal mortality for Black Americans was 3x higher than for White women according to the National Institute of Health.
Carriers that can provide intuitive, or proactive, claims filing on behalf of the employee are starting to set themselves apart. This process solves for one of the biggest issues with voluntary benefits, which is an employee forgetting to file their claim.
Whitney: The selection of the carrier is dependent on a few key factors for us, ranked in order: 1) the technology system in which the benefit will be deployed, 2) the client’s core carrier relationships, and 3) product competitiveness. Technology is first and foremost because not every carrier’s product can be built on any system, despite what they tell you. Some carriers are restricted on their structures for rates and that can be limiting. The technology implementation will determine the entire projects success when it comes to administration and enrollment. The next factor is considering the client's core carrier relationships. Oftentimes, you can leverage a financial incentive for the client by choosing one of these carriers. Additionally, it can lead to an easier implementation since there is already a relationship established. Lastly, the rates and product design come into play Affordability, while important, is not the main selling point. A carrier’s ability to be flexible and generous with underwriting is key Perpetual guarantee issue and no pre-existing condition limitations, even for pregnancy, is becoming common in the market. With the big medical carriers entering this space now, they are forcing the existing voluntary benefits market, as we know it today, to get more competitive by lowering rates, making underwriting concessions more easily, and, finally, getting many carriers to do some level of claims automation.
Thank you to our VB leaders who took the time to contribute to this month's edition of VB Voices!
John Hickey, Senior Vice President & Voluntary Benefits National Practice Leader with AssuredPartners. John holds positions on several carrier Advisory Councils and participates in carrier-sponsored workshops throughout the year. He has become a product expert for voluntary benefits, Long Term Care and carve-out executive disability plans. He has also recently been appointed AssuredPartners Voluntary Benefits National Practice Leader.
Whitney Ehret, Benefits Consultant and Director of Voluntary Benefits at Burnham Benefits, a Baldwin Risk Partner. Whitney is passionate about discovering new insurance strategies to save employer's money while enhancing benefit offerings for employees. In addition to having her own book of business, she is responsible for leading the marketing, sale and implementation of voluntary benefits for Burnhams’ clients.
Raymond Chan, Managing Partner of Insurance Marketplace, LLC. Raymond and his closest colleagues created Insurance Marketplace, LLC, an enrollment firm, to help broker and insurance carriers market and place voluntary benefits. Their focus is taking employer interest in voluntary benefits and matching it with carriers that are competitive and suitable for an easy enrollment experience. Insurance Marketplace offers communication and enrollment solutions nationally while based in the DC metropolitan area.
Megan Stavros, Voluntary Benefits Western Regional Practice Leader, Gallagher. As the Southern California practice leader for Voluntary Benefits, Megan helps clients with their strategic approach to enhance their employee benefits package. She assists CEOs, CFOs, and HR Directors to understand their organization’s ability to attract and retain key talent, while brainstorming ideas for their company to stand out among the competition.
Jen Daker, West Market Voluntary Benefits Sales Leader, Mercer, currently residing in Phoenix, Arizona. Jen has become an expert in designing and implementing industry leading voluntary benefits programs that addres the unique needs of diverse and multi-generational workforce. Throughou her career, Jen has helped organizations of all sizes and industrie integrate voluntary benefits programs into comprehensive total reward strategies, with an emphasis on inclusivity and enhancing employee satisfaction and retention.
