Advances in medical technology and the high quality of medical care that Americans enjoy mean that more people are surviving illnesses like heart attack, stroke and cancer.

The result: Today's employees are much more likely to suffer a critical illness than they are to die.

Unfortunately, surviving heart attack, cancer or stroke comes with a price - a high one. Life insurance doesn't help, and today's deductibles and copays mean out-of-pocket and unreimbursed medical expenses.

Add other expenses and lost income to the mix - disability insurance at two-thirds former pay, the lost income of a spouse who suddenly becomes a primary caregiver, or child care expenses necessitated by the survivor's recovery or caregiver's new role, for example - and many people are left between a rock and a financial hard place. The impact can be catastrophic: About 1.5 million Americans declared bankruptcy last year, 60% because of unpaid medical bills.

Enter coverage for the "big three" critical illnesses: heart attack, stroke and cancer. When provided as a supplemental voluntary benefit in the worksite market, CI has proven to be a financial lifesaver for countless employees.

Market-driven evolution

Supplemental insurance for heart attack and stroke were the first CI-type products, launched years ago. As this market niche evolved, cancer was added, followed by many other illnesses. Over time, heart attack and stroke coverage has been subsumed into a larger, more comprehensive product.

"Carriers have been focusing on expanding critical illness coverage," notes Fred Wiechmann, manager of voluntary products at Unum. "Today most carriers have made the transition to CI, which covers a more comprehensive list of conditions. In our market, most carriers offer a CI product that covers between six and 12 conditions."

Unum entered the market in the 1990s with cancer-only coverage, and added heart attack and stroke, along with a few other conditions, in their next product launch. In the early 2000s, Unum launched individual-based products covering about six conditions, but heart attack, stroke and cancer continued to be the drivers in the market - which remains true today, even as the products have grown broader. Unum's newest CI product covers 12 illnesses, according to Wiechmann: heart attack, major organ failure, occupational HIV, benign brain tumor, blindness, kidney failure, coronary bypass surgery, stroke, coma, permanent paralysis, cancer and carcinoma.

A supplemental CI product developed by Trustmark covers 10 illnesses, and has a modular structure. Customers can choose coverage for all 10 conditions, cancer-only, or everything but cancer. Trustmark "wants as many people as possible to have access to critical illness insurance, and to make sure that we deliver CI solutions with the flexibility needed to align and fit with each client's total benefit package," says Janet Buzil, the firm's 2nd V.P. of marketing.

People who have had a heart attack are no more likely to get cancer than anyone else, she points out. "So if you have heart disease, you can still get lump-sum coverage for cancer. This doesn't work the other way, however - if you've had cancer, you are more likely to get one of those other diseases."

The modular approach also creates a selling opportunity. "There are a lot of groups out there that have an old-fashioned cancer plan in force. With the everything-but-cancer module we can go into those groups and build coverage around their cancer plan, instead of covering the same disease twice and making policyholders pay for benefits they already have," Buzil notes. Cancer makes up about half of the claims under the Trustmark product, according to Buzil.

In Trustmark's products, coverage is available in $5,000 increments, up to $100,000. This allows clients to base their choice on either a coverage amount or on what they think they can afford. "Part of our underwriting and how we price the product is that the employees have to cover themselves; once they do that, they can add children or a spouse or both," says Buzil.

Most elections tend to fall in the $10,000-$20,000 range, brokers attest. At Alpha Benefits Group in Plymouth Meeting, Penn., the typical election "falls between $5,000 and $20,000 for individual voluntary coverage and between $10,000 and $30,000 for group coverage," according to Michael Kapustin, a senior VP at Alpha. "However, we give up something with group plans," Kapustin notes: "Group plans often are less sturdy - the coverage tends to have limited portability, and the premiums may go up over time."

Unum recently tweaked its CI product, and now covers children at no extra cost. "Our list of covered conditions has expanded not only for employees, but for children as well. We've developed a list of specific childhood conditions, such as Down syndrome and cystic fibrosis, to provide coverage for the whole family," according to Wiechmann.

Unum offers a wellness benefit as well. "We'll pay a $75 benefit to encourage employees to seek routine screens that can prevent some of these conditions from developing," he notes. "We feel that this will help the employer have a discussion with its employees about reducing their health care costs through preventive care."

The value proposition

What about making the sale? First of all, Unum's Wiechmann recommends, start with a conversation about the employee's medical plan and financial situation: Who's the primary wage earner? What are their long-term financial goals? What's their out-of-pocket and deductible? What people don't necessarily realize, he says, is that a critical illness entails so much more than a $500 deductible or a $1,500 out-of-pocket maximum - it's all about the additional costs that arise. "So selling the product makes the most sense when you package it with the medical plan and talk about the impact of a major illness on a family's finances.

Most people know someone who has had a major illness like a heart attack; they know how it affected them and their family. How are they coping with the financial impact of surviving and recovering? Those are the issues that connect with people - who do you know and how did it affect them?

"Once they understand the financial toll of a critical illness event, not only for them but for the entire family, CI makes sense. Having a discussion about financial protection for the future can engage younger employees as well. The plan is designed to remain at their original issue age rate class. Plus, the full benefit is available as a lump sum payment upon diagnosis. And lastly, the coverage is portable, so if you leave your current employer, the coverage goes with you," Wiechmann notes.

Trustmark's Buzil also emphasizes the income-replacement angle. "Even if you have good medical insurance," she says, "you may want your spouse to stay home with you to help provide care. So CI then becomes family income replacement. Or if you're the main child care provider and you need someone else to watch your children while you're recovering - the whole idea is to get peace of mind so that you can recover knowing that you don't have to concern yourself as much with your financials."

Expenses for travel to distant medical facilities, college tuition, retirement plan contributions and mortgage payments are also cited as important factors by Jesse Slome, executive director of the American Association for Critical Illness Insurance. Slome cites one major obstacle holding back the growth of CI insurance: a good foundation of awareness among consumers.

Getting over this hump is one of the main goals of his organization. "Once consumers become more educated, sales will follow," Slome believes.

Slome also sees parallels between where CI is today and where long-term care insurance was in the early 1990s, when most people thought of LTC as "nursing home insurance."

What does the future hold?

Brokers and carriers alike see a continuing demand for CI insurance with or without health care reform. "There will still be deductibles and coinsurance that employee will be vulnerable to, and expenses are still going to be incurred that aren't picked up by health and disability insurance," says Mile Kapustin of Alpha Benefits. "If the government actually squeezes out a lot of health care brokers, I think there is going to be a flood of brokers into voluntary benefits in general, not just CI."

The AACII's Slome agrees: "The advent of 'ObamaCare' will drive an increase in supplemental insurance, as people look to fill in the gaps that will be created," he believes. "We saw this happen in Canada. CI is perfectly positioned for this." EBA