Accuchex Blog

What is Critical Illness Insurance?

Posted by Leslie Ruhland on Feb 15, 2019 9:00:00 AM
Accuchex Payroll Solutions
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critical illness insurance

Critical illness insurance can offer your employees a financial safety net should they become seriously ill. 

While high-deductible health insurance plans are increasingly seen as the solution to keeping monthly insurance premiums affordable, they have also contributed to increased financial instability for many US workers. Nearly 50% of Americans report that they are not prepared to pay the out-of-pocket costs associated with unexpected medical expenses.

Medical expenses are a leading cause of personal bankruptcies in the US, according to a Harvard University study. Alarmingly, three-quarters of those who filed for bankruptcy due to medical bills had some form of health insurance.

Many may assume that their standard health insurance plan will cover the costs of critical, life-threatening illnesses. This is, unfortunately, not the case, and many are caught unaware when they find they are unable to pay for the uncovered costs of treatment. Even those who know that their plan won’t cover the cost of a life-altering illness or event find few options to help them adequately prepare for the prohibitively high costs that must be paid to meet their deductible.

Many US employers have responded to the financial concerns of their employees by offering one or more supplemental insurance policies that can help close the gap in coverage and provide their employees with peace of mind. Critical illness insurance can help to reduce employees’ financial concerns by providing them with coverage that will pay out a lump sum that can be used to pay their bills or treatment costs that result from a life-threatening event.

Supplemental insurance policies, such as critical illness insurance, can be offered to your employees at low or even no direct cost to your business and can give you a competitive advantage in your recruitment and retention efforts, as well.

Read more: The 5 Key Benefits of Providing Supplemental Insurance

Who should consider critical illness insurance?

A critical illness policy would be beneficial to most people, though many may not have considered coverage or even knew of its existence before. A significant number of Americans are unprepared to pay for an unexpected illness and may have limited options to get out from under the seemingly insurmountable medical bills that a critical illness leaves in its wake.

When a person is diagnosed with a covered illness, critical illness insurance can help with the cost of treatment for life-limiting diseases and events and help pay the bills so patients can focus on recovery instead of their budgets.  

For those diagnosed with a grave disease, recovery can require all of their energy and should be their top priority. The reality, though, is that the state of medical insurance and the high cost of coverage creates challenges that are impossible to ignore for many. Unexpected expenses pile up on top of the regular cost of living even with short recovery periods, which can lead many to return to work earlier than recommended or, in worst case scenarios, to be unable to receive proper treatment at all.

Consider this: A heart attack can cost an employee who is covered by a high-deductible health insurance plan with $50,000 or more in out-of-pocket expenses. For the 29% of US households who have less than $1000 in savings, an expense of this size may leave them only with life-altering options to get out of debt, such as selling their home or declaring bankruptcy.

What is covered by critical illness insurance?  

While covered illnesses will vary by plans and carriers, the Aflac critical illness insurance coverage available through Accuchex covers:

  • Heart attack

  • Stroke

  • Traumatic brain injury

  • Renal failure

  • Coma

  • Paralysis

  • Third-degree burns

  • A variety of other heart-related traumas

These conditions, which can necessitate lengthy medical care and treatment, can quickly exceed the coverage provided by core medical insurance, in addition to accumulating the up-front costs needed to meet the plan deductible before coverage kicks in.

While some carriers will include certain types of cancer in their critical illness plan, Aflac offers a separate supplemental insurance option for cancer coverage, which allows employers to assemble a benefits package with the best mix of coverage choices for their workforce.

Depending on how an employer extends these benefits, this can also allow employees to select from a la carte options to create coverage most suitable for their needs.

  • With an employer-paid plan, the policy payments are made for covered employees by the employer. With this arrangement, 100% of the premium costs are deductible to the business.

  • Premium costs are paid from employee payroll deductions, often on a pre-tax basis, for employee-paid plans. This approach can allow employees more flexibility to select the coverage that is best for them and their families, and employers will also enjoy a reduction in their payroll liability when employee premiums are paid with pre-tax earnings.

  • When a plan is mutually funded, as is often the case, employers pay the premium costs for their employees and give them the option to extend coverage to their dependents through payroll deductions.

How does critical illness insurance help?

Critical illness insurance helps manage a portion of the expenses triggered by life-altering illnesses and events by paying a fixed lump-sum cash payment to the insured upon receiving a diagnosis of a covered illness or procedure. Many find critical illness insurance appealing because the payout may be used to cover deductibles, copays, ongoing therapy and treatments, and even household and living expenses.

Often, employers opt to extend several supplemental insurance options to their employees so they can stack their coverage. For example, an employee with Critical Illness, Hospitalization, and Short-Term Disability plans might potentially file a claim and receive a lump sum payment from their Critical Illness plan, receive payment from a claim filed for hospital stays under their Hospitalization plan, and receive pay for time off from work during treatment under a claim from their Short Term Disability plan.

Learn more about stackable supplemental insurance coverage.

Partner with Accuchex to offer critical illness and other supplemental insurance plans to your employees

Supplemental critical illness insurance provides employees with peace of mind, knowing that there’s a safety net in place should they need it in the future. And, if an employee is faced with a life-threatening illness, supplemental critical illness insurance can provide the lifeline that they need to focus on their recovery instead of stressing over their bills.

Critical illness insurance is only one type of supplemental insurance that employers can offer their employees as part of a robust benefits package. Plans that provide coverage for maternity care, short-term disability, accidental injury, cancer, and hospitalization are among the most popular options. To learn more about supplemental insurance plans and how Accuchex can help you explore and implement these plans, download the Accuchex Employer’s Guide to Supplemental Insurance or call Accuchex Payroll Management Services at 877-422-2824.

Topics: supplemental insurance

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