As employers struggle to provide quality employee benefits in a difficult economic climate, insurers are working to enhance products to meet the changing needs of both employers and their employees. A recent focus has been on critical illness insurance plans, which have long been a valuable mechanism for helping employees pay for non-medical and out-of-pocket medical costs.

Critical illness insurance was pioneered by South African physician Dr. Marius Barnard, who assisted his, brother Christian, in conducting the first human heart transplant in 1967. Even as new medical advances were saving lives, Barnard was struck by the often devastating financial fallout for individuals recovering from surgery, ranging from loss of income to big bills during recuperation. So he pushed insurance carriers to add a new kind of coverage for critical illness. “You need financial independence when you’re ill,” he observed, “not because you’re going to die, but because you’re going to live.”

Medical and non-medical costs loom large

During a health crisis, families can incur enormous costs that have nothing to do with the actual medical care their loved one is receiving. In fact, two-thirds of cancer costs are non-medical (American Cancer Society, 2008) and almost 60% of consumers would have to turn to savings to fund these costs (Guardian’s Benefits and Behavior Report: Spotlight on Group Critical Illness Insurance, 2008).

With critical illness coverage, an employee who has a heart attack, stroke, cancer diagnosis, or other critical illness (major organ transplant, kidney failure, coronary artery bypass graft) receives from $1,000 to $50,000, depending on the employer plan. Besides being available to cover higher deductibles, funds also can be used to pay for out-of-network care, travel to a medical center, experimental treatments and non-medical expenses like child care and lost salary of a spouse who takes time off to serve as a caretaker.

The Guardian Life Insurance Company of America, a leader in offering critical illness insurance to employer groups, recently made several enhancements to its critical illness product aimed at increasing flexibility and giving access to more employees.

Pre-existing condition limitation may be removed

On non-contributory critical illness plans with 10-plus lives, Guardian offers the ability to remove the pre-existing condition limitation, making critical illness an even better fit when sold alongside of a high deductible medical plan. It also allows for a smoother claims process with fewer delays.

“By removing the pre-existing condition limitation for employer-paid plans, insured employees aren’t going to have to worry that they will get a payment denied because of something they may have had,” says Barry Petruzzi, Guardian’s second vice president for group insurance products. “It makes for a much easier conversation with employees when a plan is being updated, and it gives an employer comfort that workers are being offered a solid benefit.”

Portability extended to age 70

Guardian has also removed the two-year limit on the duration of portability on all critical illness plans. Ported critical illness coverage will extend until age 70. This gives employees more flexibility and makes Guardian’s group critical illness product more competitive against individual critical illness products.

“While we’ve always offered portable critical illness coverage, we felt the two-year limit restricted access and limited the flexibility of our product” says Petruzzi. “By extending coverage to age 70, we can give employees the assurance that they are covered even if employment terminates.”

Availability down to two lives

For years, critical illness coverage was only available to larger employers. But recently, Guardian also extended critical illness coverage to employers with two to 15 employees, giving small companies access to the same benefits as large company employees.

“It became clear to us that this financial benefit is just as important to employers with as few as two employees, as it is for larger employers,” says Clancy Merrill, Guardian’s executive director of small group sales. “Brokers have been asking us to extend this product to their small group clients, and we have done so.”

Additional financial benefits

There’s an additional financial benefit when Guardian’s critical illness plan is paired with the carrier’s hospital-admission rider. The benefit pays a per day benefit up to $500 (depending on the plan design) for as many as 10 days per year for an extended hospitalization due to a serious injury or illness not covered by critical illness.

“Our offering matches up against any other carrier’s offering in the group critical illness market,” says Petruzzi. “The combination of the critical illness lump sum with the hospital admission rider that covers an employee for any other illness or accident is unique in the industry.” In addition, Guardian offers generous guarantee issue on critical illness up to amounts as high as $20,000, amounting to a triple play in which everyone in an employee group is eligible.

Guardian’s critical illness coverage gives brokers an innovative strategy to offer clients, one that is still relatively new to the marketplace. “One of the biggest benefits critical illness provides employees is the ability to pay for expenses, both medical and non-medical, and concentrate on recovery rather than financial hardship,” says Petruzzi.

The Guardian Life Insurance Company of America 7 Hanover Square H-26-E New York, NY 10004 212/598-8000 www.guardianlife.com