If you’ve been in this business for longer than two minutes, you already know the medical plan drives the conversation at renewal…and it should. Financially, the medical plan accounts for the clear majority of total benefit spend by an employer and, rightfully so, commands the vast majority of the renewal discussion. Because of that, the ancillary benefits (for example: dental, vision, life, disability, worksite voluntary benefits, etc.) don’t receive the same “air-time” the medical behemoth does.
So, how can you make traditional voluntary benefits like Critical Illness, Accident, and Hospital part of the “medical” conversation? Sure, we could talk about how these voluntary benefits can help offset a member’s out-of-pocket expense (essentially protecting their expense towards deductibles, co-insurance, co-pays, etc.) but, as we take a closer look at how these benefits relate to the actual medical claims in a company, we can come away with a unique perspective.
Over the past four years, I’ve had the privilege of participating on the National Advisory Council for one of the top Voluntary Worksite Carriers in the country. This council was designed to help the carrier with direct insight into the employer/employee market, which allows them to make better decisions about what benefits are important to clients and how they should look, feel, and work for the employer and employee. Last year, we took a new approach toward assessing the “need” and “value” for one of these benefits — Critical Illness.
To summarize our case study, we reviewed the ICD-10 codes the carrier considered when paying a Critical Illness claim. We then compared those to the actual ICD-10 codes of a mid-size employer (800+ employees) over a three-year period. In short, we’ve identified a unique way to look at these benefits and how they specifically correlate to the members and claims that are already in your medical plan today.
A glimpse into the numbers…
- Matching Claims — From 2016 through 2018, roughly 10 percent of all paid claims had a matching ICD-10 code. Those 10 percent of paid claims came from 21-23 percent of unique members and represented 19 percent of the total paid claim dollars year over year. The numbers were incredibly consistent, varying by only a 1-2 percent difference year over year. That means 1 out of 5 plan members would have benefited from having the Critical Illness plan.
- Chronic Condition Prevalence — We then looked at the prevalence of the top three chronic conditions paid under the Critical Illness plan: stroke, heart attack, and cancer. In 2016, the overall prevalence (specific to this client) was below the national benchmark. But those numbers quickly increased and, in 2017 and 2018, the prevalence for these conditions exceeded the national benchmark. Trending those numbers forward, 1 out of every 4 plan members were projected to have a matching claim in the coming years and, therefore, would benefit from electing the Critical Illness plan.
- Member Out of Pocket — We also looked at the out-of-pocket expense for the matching members (specific to these ICD-10 codes). The average member out-of-pocket expense, specific to these codes, was almost $800 per member, per year. The estimated average Critical Illness benefit payment received under these codes far exceeded the member’s average out-of-pocket expense. In some cases, the Critical Illness benefit could completely subsidize the out-of-pocket expense and the annual premium associated to the Critical Illness plan. Simply put, the Critical Illness plan would benefit these members in a huge way. And, when you add in the benefit paid on the Healthy Living Rider ($100 benefit to each member completing a preventive screening), the story is even more compelling. This rider also serves a dual purpose, as the rider financially incentivizes members to proactively take action on their health. Now, what’s not to like about that?!
Let’s face it, medical does (and forever will) drive the conversation during your renewal strategy. But with a new perspective, I’d encourage you not to lose sight of the obvious need and value the ancillary benefits can provide.
I’d love to know your thoughts on how you and your company analyze and value these ancillary benefits for your workforce. Please feel free to email your Holmes Murphy consultant to see how these benefits could provide value to your employees and their families!
