Have you ever seen a space capsule return to earth?
The astronaut emerges from a cone of scorched metal and shredded foil, only to struggle against the weight of gravity. In many ways, surviving a critical illness is like returning from outer space. Remarkable medical advances enable patients to defeat disease, only to be crushed by the bills piling up at home.
Insurers have taken note, and one innovation – the critical illness (CI) policy – offers a powerful solution to help patients land gently. CI provides a lump sum to help individuals and families pay accumulated expenses, including non-medical bills from lost income, travel, childcare, and more.
It is important to understand the forces driving years of double-digit growth in the U.S. CI market. Critical Illness helps the insured manage costs, provides vital certainty and offers a simple-to-administer solution to satisfy a real, and growing, need.
Houston, We Have a Problem… and a Solution
In some ways, Americans are victims of our own scientific successes. U.S. patients have a greater likelihood of surviving a medical emergency than ever before. Early in my career, for example, stroke was not considered a medical emergency; there was little physicians could do in an acute setting but provide aspirin. Today, even small hospitals have developed advanced protocols, offer clot-busting agents and, in some cases, can remove the clot.
While we are able to live longer, we are not necessarily healthier when we leave the hospital. Acute outcomes may have radically improved, but treatment of the whole patient has not kept pace. Patients are discharged with ongoing chronic, and often disabling, conditions that can impose severe financial burdens.
Medical costs represent the leading cause of U.S. bankruptcy: 33%-80% of cancer survivors exhaust their savings to finance medical expenses. Up to 34% borrow money from friends or family to pay for care. And many others fall into substantial debt. In a study of colon cancer survivors in Washington State, mean patient debt was $26,860.
Costs are not limited to direct medical expenses. Consider a truck driver who suffers a minor stroke, which becomes apparent due to a seizure. Out-of-pocket costs linked to hospitalization could be relatively low, but if the seizure prevents him from operating a motor vehicle for six months, this driver loses a source of income. Even though physically and cognitively, this patient is close to intact, he or she still suffers financial devastation yet will not qualify for traditional disability or additional medical coverage.
The CI product offers a solution: guaranteed issue without regard to health status, making it easy for the insured to enroll and for the insurer to administer. There is no deductible and the insured chooses how to use lump sum funds. CI products also are designed to complement other accident, hospital and disability products, providing more complete coverage. As the U.S. health system produces increased confusion, CI provides certainty.
3, 2, 1, Liftoff
Timing is also important. Many critical illnesses are not immediately fatal – patients can live with certain cancers, autoimmune diseases, and other conditions for a decade or longer. Evidence suggests, however, that CI patients are most in danger of stopping medication, declaring bankruptcy, or missing work within the first three years of diagnosis. In these early years, individuals can become overwhelmed by mounting costs and often are most in need of financial help to establish a sustainable care regime.
The typical Multiple Sclerosis (MS) patient experience makes this case. As anyone with this progressive disease can tell you, the out-of-pocket costs do not wait until the patient becomes disabled. A prescription plan, even when robust, is unlikely to cover the entirety of MS drug treatments, and the average U.S. patient pays about $6,000 annually out of pocket. Many therapies involve self-injection, imposing barriers to treatment adherence. Easier-to-administer oral medications present their own obstacles due to high drug costs. In both cases, non-compliance then leads to sick days, loss of work and spiraling financial consequences.
CI helps address this problem. Lump sum payments are not designed to cover the lifetime costs of a disease, but to help the newly diagnosed establish good quality care immediately. A CI payment may enable an MS patient to sustain a treatment regime, better control the disease, and remain in the workforce longer.
More than a Moonshot
CI is no moonshot for U.S. carriers. The first products arrived in South Africa decades ago, and insurers around the world have successfully priced, launched, and refined multiple versions since then. Because CI is relatively new to America, however, U.S. carriers have an opportunity to apply lessons from global experience.
- Keep it simple. CI product definitions have expanded to cover a growing number of conditions, but complexity may contribute to unnecessary administrative and claims challenges. Insurers should note that the vast majority of insured individuals still claim for the same three critical illnesses: cancer (full or partial benefit), heart disease (attack or coronary artery diseases), and stroke. Insurers have also limited the need for claims appeals by using CI definitions that are medically accurate and current, easy-to-understand with clearly defined criteria, reasonably met, and brief.
- Be consumer friendly. Globally, carriers are paying closer attention to consumer trends and designing CI products accordingly. Because the workforce is aging in many markets, for example, CI products increasingly have no maximum age to issue. Also, as CI coverage is relatively new and greater awareness is needed, CI products are being designed with no minimum participation level. And insurers are lessening waiting and separation periods to meet market demand.
- Maintain the spirit of the product. Many cancers and other critical illnesses can reoccur over time, so CI products are being designed to pay out if certain diseases return. Policies have been carefully crafted, however, to avoid including unrelated events such as a new diagnosis of a different form of disease. Similarly, carriers now avoid clauses that restrict policyholders from claiming critical illnesses payouts in multiple categories. For example, the insured increasingly can claim for both coronary artery disease and stroke, if both illnesses are presented.
Insurers face many challenges as the U.S. population ages and medical science advances. Product innovations such as CI suggest that a spirit of innovation is alive and well – and that U.S. carriers can continue to find solutions to help policyholders land on solid ground.