By Dave Willis, CPIA

The evolving healthcare environment continues to push employers to find new ways to fill coverage gaps and provide their employees viable alternatives. Agents and brokers are helping them do just that. "We are seeing more and more brokers-and it doesn't matter whether you're talking about large national brokers, regional brokers or smaller agencies-thinking about and selling voluntary benefits," explains Dan Lebish, executive vice president and chief operating officer of Aflac Group Insurance.

Critical illness insurance has become a strong part of the mix, for various reasons. "Health care reform and the ongoing transition to high-deductible health plans remain the biggest drivers affecting the critical illness market," says Bryan Burke, director of product management and development at Sun Life Financial. "Critical illness is designed to help offset out-of-pocket medical expenses associated with a high-deductible health plan."

Lebish has seen a repositioning of the product as an essential part of employer offerings. "We see critical illness being integrated much more with the major medical," he observes. "With so many more major medical costs being pushed to the employee, either through the Affordable Care Act or high-deductible health plans, critical illness insurance is a perfect fit."

According to Alvin Heggie, Sun Life Financial director of market development, the 2016 outlook for the product is strong. "The shift toward high-deductible health plans has spurned more employer-paid critical illness," he says. "I expect we'll see employer-paid critical illness benefits included in health savings account (HSA) and high-deductible health plan options going forward."

He points out that growth in HSAs and HSA plan participation will affect critical illness sales and the carriers brokers choose. "A spike in HSA participation has generated more exposure for employers and employees who have critical illness plans that may not be HSA-compatible," Heggie says. "This creates a real need for employees and a real opportunity for brokers."

"Most of our brokers sell a gap plan alongside a high-deductible medical plan," explains Peggy Hayes, vice president of sales and business development at American Public Life Insurance Company. "They find that the critical illness product is a good complement. When a person is diagnosed with a major illness, it's certain that there will be some significant medical expenses that can quickly eat through the medical plan's deductible."

Hayes points out that, while gap plans can help with those medical expenses, a critical illness plan can provide what she calls "lifestyle protection." The critical illness product can help ensure that the family doesn't experience financial hardship on top of everything else.

According to Lebish, more and more carriers are offering critical illness products. "Carriers that used to be pure group benefit carriers selling just short-term or long-term disability and life are now offering critical illness," he explains. "Major medical carriers are doing it as well."

He says market expansion has led to confusion about critical illness plans and products. "A trend we see now is carriers trying to simplify their critical illness plans and focusing, at least from an education and communication perspective, on the most critical or core conditions-things like heart attack, stroke, and cancer," Lebish notes. "That's not to say they don't cover a range of other conditions, but the focus is really on trying to simplify the products and drive greater understanding."

Employer buy-in

To be successful with the product, brokers and agents must first persuade employers to offer it. Doing so can require overcoming certain challenges. "A primary challenge benefit brokers have when persuading employers to offer critical illness is the vast difference in the sales process," Heggie explains. "A critical illness sale is predicated on employee education and their enrollment conditions. With most other benefit product sales, they're predicated on rates." He points out that brokers are becoming more proficient at selling critical illness insurance, and he expects them to continue to improve.

Yet securing good enrollment conditions can be a challenge. "Individuals need to be educated about CI so they can understand whether it's a protection they should add to their financial safety net," says Burke.

Another factor is shrinking human resources departments. "In some cases, they're being eliminated altogether," Hayes remarks. She points out that employers should be mindful of the repercussions of offering additional benefits. "It's a fine line to balance the needs of employees with the realities of the corner office," she notes.

Hayes adds: "Clearly, employees want and need critical illness products. Our brokers succeed by demonstrating to employers that CI can be added at no additional cost and without creating additional HR work. By offering a product that can be added to an existing bill, with no employer contribution required, and easily enrolled on the same electronic platform as the other benefits, brokers can satisfy the needs of employers and employees alike."

Lebish recommends that agents and brokers address a couple of issues with employers. "Recognize that employers want to keep their people productive and free of significant financial risk," he advises. "Talk about presenteeism, which is when employees are physically at work but mentally consumed with other things-like how they'll handle the cost of a critical illness." He points out that studies show that people spend a significant amount of work time on financial-related issues. "For an employer," he adds, "it's important to keep employees productive."

It's also important for employers to understand how they can best help employees. "Ask employers whether they believe their real responsibility is to provide a benefit that covers a predictable, easily budgeted expense, like dental or vision expenses," he suggests, "or whether it's to protect them from financial ruin."

He points out that upwards of 95% of employers offer dental to their employees and about 83% offer vision. "But only about 30% offer critical illness," he comments. "In reality, you can preplan and budget for most dental and vision costs. You can't plan out a critical illness that could leave an employee with thousands and thousands of dollars of unpaid medical bills." From a cost standpoint, he estimates that between $5,000 and $15,000 of critical illness insurance can cost the same as or less than a traditional dental policy.

Employee engagement

Lebish recommends having a similar conversation with employees during enrollment. "It's important to educate employees about why they need a critical illness policy," Lebish explains. "Get them to understand their exposure; when they're faced with cancer or they have a stroke or a heart attack, they could end up with $10,000 or more in out-of-pocket expenses."

He points to a white paper his company commissioned in early 2015 that looks at the relative employee impact of various policies. "Our outside research firm found that, over a 10-year period, there's a one-in-ten thousand chance an employee will have $3,000 of claims cost for vision events," Lebish notes. "In the same period, they'll have $5,000 in claim payments for dental. But there's a one-in-ten chance they'll have a $34,000 exposure if they're exposed to an event covered by a critical illness policy."

Such discussions can be tough. "The mindset that goes into choosing a benefit like critical illness can be a challenge," Burke observes. "Employees don't want to think about these types of health conditions happening to them or their families."

He says it's important to focus the education process on how the benefit can be used rather than on the diagnoses themselves. "Employees need to see how the benefit can serve their financial goals by helping to pay for high deductibles, keep their retirement account or HSA funded, pay everyday bills, or simply remain in the lifestyle they're accustomed to, even though they're experiencing a difficult health event," Burke says.

According to Hayes, when employees select their benefits, they face two challenges: time and money. "For affordability at the worksite, agents and brokers should offer a basic group product with a small face amount," she recommends. "For ease of enrolling, offer only one critical face amount-or at most, two. There's no need to offer $5,000 to $50,000 options when, in reality most people will select $10,000. And, as always with worksite
products, choose a product that's guaranteed issue."

Heggie says agents and brokers who are enrolling employees need to focus on access and wallet share.

"Employees are less likely to spend their limited resources on products they don't understand," he points out. "The market is rapidly moving away from one-on-one enrollment meetings in favor of technology alternatives, which unfortunately means a more passive approach."

He says agents and brokers have less opportunity to meet with and educate employees, and employees miss out on being able to tap the agent or broker for guidance and expertise. "This means employees must choose their benefits with little understanding of complex products like critical illness," Heggie notes.

Agents and brokers need to address this challenge. "This reinforces the need to limit new products, slow installation, and sell employers on the value of employee access and education," he says. "Traditional solutions like enrollment partners have become too expensive, often demanding 70% to 80% of the commission, which leaves no incentive for the broker."

Technology may provide the solution. "We're now seeing carriers providing enrollment and education resources, which cost the broker little or nothing," Heggie says. "In the future, carriers will fund the cost of benefit administration systems to drive enrollment and provide greater employee access, and this won't cost brokers anything."