There's nothing revolutionary on the horizon for voluntary critical illness plans - and that's a good thing, says Don Hansen, co-owner and president of The Ark Group.

"That actually, to me, says there's good stability in the marketplace for worksite," Hansen says. "Could there be more growth? Without a doubt. But with the current carriers and the right amount of agents selling CI, I'd say that's a pretty solid foundation."

From what Hansen has seen as a former board member of the National Association of Critical Illness and currently as a marketing consultant for insurance professionals, CI is not only a priority for agents, but it's also "one of the fastest-growing products, if not the fastest-growing," in the voluntary marketplace.

Putting CI in CDHPs

As an increasing number of employers look to save costs by implementing high-deductible health plans, Brad Ridnour, East Coast regional sales vice president for Trustmark, believes CI will continue to gain traction as a voluntary benefit.

"What's making it important now is some of the changes that are going on in terms of the employers trying to save money on their health plans [by] raising deductibles, raising out-of-pocket limits, etc.," he says. "So I think that's caused the increased attention on critical illness."

Unum has offered voluntary critical illness coverage since 1991 and seen some "tremendous success" over the years, says Scott Brown, director of critical illness products. He attributes it to the probability that participants will develop one of the covered conditions, particularly heart attack, cancer or stroke, over their lifetime.

"We've seen a growing need to add this coverage for folks in the middle-America market who have limited savings and who recognize the financial exposure that they would have if they have one of these critical illnesses," he says.

In MetLife's 2009 employee benefits trends study, 45% of employees report they've been living paycheck to paycheck, while 55% of men and 74% of women say they are very concerned about their financial security if their family's primary wage earner disabled.

"A product like CI insurance can play an important role in strengthening an employee's financial safety net," says Clea Barth, assistant vice president of critical illness insurance for MetLife. "So the more that brokers can get out there and talk to employers who are maybe changing their medical plans or looking at how to offer more comprehensive plans, it's a great opportunity for that."

When reaching out to potential CI clients, it isn't about blue-collar, gray-collar or white-collar employees. It's more important to market to those with enough discretionary income; for Unum, that's from $25,000 to $75,000 on average.

Not all plans are created equal

Around 80% of CI claims come from the big three - heart attack, cancer and stroke - which, not surprisingly, are the top three killers of women and among the top four killers of men, says Hansen.

Some CI products are stronger than others. It's not the number of benefits that are provided under a CI policy, but the definition of the benefits that are important, Hansen adds. For example, some companies require a 30-day stroke definition before any benefits are paid, while others are as short as 96 hours. Then there are plans that distribute benefits once a member is put on an organ transplant waiting list, while others won't pay out until the transplant has taken place. "The benefit definitions really separate the great policies from the poor ones," says Hansen.

Educating yourself on these differences is the key to effectively passing the knowledge onto clients. "The more [brokers] become a student of the game and really understand what variations of CI are out there, the better able they're going to be to talk to their clients about critical illness," says Ridnour.

The core concept of CI is simple: Get diagnosed with one of the covered illnesses, and you'll receive a lump-sum payment. However, there are many "what if?" scenarios to consider, says Ridnour.

"Where the education comes into play is on a reoccurrence-type benefit - what happens if it happens again? What's the policy wording regarding a waiting period when I first buy my policy? Are there any preexisting conditions? Producers need to educate themselves on what's out there and what's not," he says.

One of the biggest values of acquiring critical illness coverage at the workplace is the emerging popularity of guaranteed issue coverage, which was once very limited in the marketplace, says Brown. "The power of guaranteed issue is that it offers someone who had a prior history of heart attack or cancer the ability to obtain some level of coverage," he says.

The fact that guaranteed issue is often tied to a minimum percentage of employees electing the coverage makes communicating the benefit all the more important. "If you have a passive enrollment and just say, 'Sign up here on this form or go to a Web portal and elect coverage' without having someone communicate the overall benefits choices, your participation suffers," says Brown.

Communication is the most important component of CI or any voluntary benefit, adds Ridnour. "That's the key to success and having the employees appreciate and understand and ultimately utilize that benefit."

Is more better?

Critical illness may cover the same benefits as other voluntary offerings such as stand-alone cancer plans, but what's covered under the plans is entirely different, says Hansen.

Cancer plans will typically make a partial payment upfront, then reimburse for medical expenses later.

"There are many challenges with reimbursement policies mainly because the client never really knows how much benefit they'll get, and you can't plan effectively based on possibilities," he says. "With CI, your client knows the benefit they will get paid, as the benefit is paid in a lump sum, tax-free amount. And just as important, they are in charge of how the money gets used."

Similarly, some would compare CI to long-term care, but the two were designed for completely different stages of life.

While LTC protects the retirement portfolio during the asset preservation stage of life, "CI ensures there are assets for LTC to protect. LTC is imperative coverage but not until people get closer to preserving their assets," Hansen says.

Hansen looks forward to more companies following in American General's footsteps and offering a new generation of CI that includes loss of independent living benefits to serve as a transition to LTC.

Meanwhile, another emerging trend is a wellness benefit option under a CI plan that reimburses an employee each year for having certain tests and routine exams done.

"Wellness has been on the critical illness plan to promote preventive measures such as routine screenings so you can catch these illnesses early or prevent them altogether," says Brown.

MetLife's CI product covers cancer, heart attack, stroke, major organ transplant, kidney failure and coronary artery bypass graft, and there are no plans to expand it, says Barth. She's found the best way to market it is to keep the offering as simple as possible.

"We want to make sure people understand how it works," she says. "By keeping the offering simple, we can get the highest participation rates."

By providing either $10,000 or $15,000 coverage and not requiring any underwriting, MetLife gets participation rates in the 10% to 20% range. "Simplicity is key for us," says Barth.

Guardian has taken another approach by recently combining CI with a hospital admission benefit.

"That combination is very unique and it's something we're excited about being able to offer," says Barry Petruzzi, second vice president of life, disability and critical illness insurance.

From one to many

Not only is Guardian offering CI combined with a hospital benefit on a voluntary basis, but it is also heavily promoting the package to group plans as a way for employers that have switched to high-deductible plans to continue investing in their employees. By contributing funds to an HSA account and providing CI benefits, employers will be giving employees who are nervous about meeting a high deductible unrestricted, up-front access to money, says Tim Bireley, vice president of group medical.

"This starts to give people comfort that if they have a significant disease, they have some money there that they can use one of two ways," he says. "They can pay the non-medical expenses or pay the deductible."

An advantage of adding some form of CI coverage to a group plan for Guardian customers is the benefit becomes guaranteed issue.

Whether it's sold as a voluntary or group product, Guardian views CI as part of a group dynamic. "It's just a matter of who participates and who pays the premium," says Petruzzi.

And Guardian's not alone. Unum attributes part of its recent 20% sales growth to the company's new group critical illness product. "It helped boost sales," says Brown.

While most of Unum's CI sales remain in the voluntary category, some employers are using CI coverage as a carrot to encourage their employees to elect their high-deductible plan, then providing them with the option for supplemental voluntary coverage on top of it, says Brown.

"It gives us the ability to have flexible funding choices within the plan while retaining some of the key features of the individual coverage such as level rating [and] portability. So it's kind of a hybrid," he says. "And we're seeing success already."