The document discusses the need for supplemental health insurance given the risks and costs of illness or injury in the current US economy. It notes that 1 in 6 Americans is hospitalized each year, with the average stay being 4-5 days. Medical costs have risen significantly faster than overall economic growth. While employers have reduced coverage, individuals now pay more out of pocket. As a result, medical expenses are a leading cause of personal bankruptcy. The document argues supplemental insurance can help protect families financially against the risks and costs of major illnesses like cancer, heart disease, and injuries. It provides guidelines for evaluating supplemental plans, such as lump sums for illness diagnosis or daily benefits to offset costs.

1. [ 01.22.2009 ]
Supplemental Health Insurance:
A ‘Must’ for Americans in the Current Economy
By Ryan Berry, Connie Burgess and Kate Nelson
Introduction Risk of Illness and Injury
Economic concerns in the United States Many of us, at one point, will hear
Introduction
today are as numerous as they are seri- from our physician the words we fear
1
ous. National debt, falling stock prices, the most: Cancer. Heart disease. Stroke.
record home foreclosures, a weak U.S. Those who don’t may have to support a Risk of Illness
dollar and a negative savings rate have family member or good friend through and Injury
come together to create a “perfect treatment for one of these diseases. 1
storm” in our economy.
According to an Eastbridge Consulting High Cost
Americans are struggling to manage Group study, in a typical year 1-in-6 of Medical Care
their family economies. Many are battling Americans is hospitalized due to sickness 2
stagnant wages, overwhelming mortgage or accidents.2 The average hospital stay
Who Bears the Burden?
debt, crippling credit card debt and is four to five days in length, including
unpaid medical bills. hospitalizations for everything from 2
minor broken bones to major organ Implications
Medical debt is, in fact, a leading cause
transplants.3
of personal bankruptcies in the U.S. today.1 3
Medical care from hospitals and other
Sensible solutions are needed to help A Solution
providers is more extensive when certain 4
consumers control their health care
health conditions—namely injuries, heart
expenditures and protect their hard- Buyers’ Guide to
disease, stroke and cancer—occur.
earned assets now and in the long term. Supplemental Insurance
Injuries 4
Supplemental health insurance is a
The National Safety Council reports
practical solution. Due to the risk of Summary
that a disabling injury occurs once
incurring illnesses or injuries, and the
every 1.6 seconds in the U.S.4 Nearly 5
high cost of medical care, the protection
2-in-3 disabling injuries among
afforded by these products has never been
American workers occur off the job,
more important to American families.
and therefore are not covered by
workers’ compensation.5
Heart disease
According to the American Heart Asso-
ciation and American Stroke Association,
about 80.7 million Americans currently
have cardiovascular disease.6 Even the
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2. [ 01.22.2009 ]
Supplemental Health Insurance: A ‘Must’ for Americans in the Current Economy
most extreme heart-care scenario—a is $14,000 for an adult.12 Another 21%
heart transplant—is becoming more of health care expenditures goes toward
common. There were 2,192 heart trans- physician and clinical services.13
plants performed in the United States in
When most people think about the high
2006 and 2,125 in 2005.7
cost of health care in the U.S., they imagine
Cancer expensive hospital stays and pricey
“Cancer” is the word patients fear hearing. doctor bills. Yet these costs represent
As the average life span of Americans has just half of the individual’s total poten-
increased, so has the risk of developing tial health care liability. A nearly equal The American
cancer. The American Cancer Society amount goes toward additional medical Cancer Society reports
reports that men have nearly a 1-in-2 and nonmedical expenditures related
men have nearly a
lifetime risk of developing cancer, while to care.14 These nonmedical costs are
1-in-3 women likely will develop cancer harder to anticipate. Most people aren’t 1-in-2 lifetime risk
at some point in their lives.8 In 2008 prepared for costs such as transportation of developing cancer,
alone, more than 1.4 million new cases to and from medical facilities, lost wages
while 1-in-3 women
of cancer are expected to be diagnosed.9 from extra sick days and additional child
or family care expenses. likely will develop
Given the prevalence of accidents and
cancer at some point
injuries, as well as catastrophic illnesses
Who Bears the Burden?
like heart disease and cancer, individuals in their lives.8
As health care costs have increased, so have
are right to be concerned about their
health insurance premiums. From 2002 to
personal health risks and the costs
2007, health premiums grew 78%.15
associated with treatment and recovery.
America’s employers are facing rising
High Cost of Medical Care costs for insurance and total benefits—
Health care spending has consistently while they struggle to remain profitable
grown faster than the overall economy in a difficult economy. In response,
since the 1960s. In 2007, spending on they’re reducing operating expenses
health care was about 16.2% of the by cutting benefits and eliminating
U.S. GDP.10 employee benefit options—leaving their
workers responsible for a greater share
The largest chunk of overall health care
of insurance costs. Nearly 3.7 million
expenditures—nearly 31%—goes to pay
fewer people had employer-provided
hospital costs.11 That’s not surprising
insurance in 2004 than in 2000.16 In
considering that the average per-patient
2007, the percentage of people covered
amount charged by U.S. hospitals
by employer-funded health insurance fell
(which includes care for everything from
for the fourth year in a row.17
stitched-up cuts to open-heart surgery)
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3. [ 01.22.2009 ]
Supplemental Health Insurance: A ‘Must’ for Americans in the Current Economy
As shown below,18 due to reductions in 29% reported that medical expenses
employer-provided benefits, individuals contributed to their current level of credit
are paying higher out-of-pocket costs for card debt.23
medical care, including premium expenses,
Not surprisingly, about half of all
copays, coinsurance and more.19 Among low- and
personal bankruptcies are attributed in
2004 2006 part to medical problems.24 middle-income house-
Increased copays 38% 44% In an attempt to reduce household ex- holds with credit card
penses, more Americans are making poor debt, 29% reported
Increased
25% 37% health care decisions. In an October 2008
deductibles that medical expenses
study by the Kaiser Family Foundation,
Decreased contributed to their
12% 13% 31% of surveyed respondents said they
coverage levels
skipped recommended medical tests or current level of credit
Fewer plan treatments to save money.25
10% 9% card debt.25
options
This problem is even more marked in
Implications rural areas. In small towns and sparsely
In an October 2008
Many Americans are struggling to make populated communities, residents are
more likely to suffer certain types of study by the Kaiser
ends meet. The last thing they need is
an illness or injury to further stress their chronic conditions, such as diabetes,26 Family Foundation, 31%
and are more likely to die from heart
resources, especially when so many are of survey respondents
battling personal debt. disease.27
said they skipped
After adjusting for inflation, the Because they tend to have fewer options
recommended medical
indebtedness of U.S. households has risen of health care providers—and often must
travel some distance to receive quality tests or treatments to
42% over the last five years alone.20 As
a result, families are more vulnerable to care—people in rural areas are less likely save money.26
financial difficulty and a deteriorating to seek regular preventive care. As a
quality of life if an injury or illness occurs. result, they are more likely diagnosed
with a major illness requiring advanced
One-third of Americans report they have treatment.28
had problems paying medical bills in the
past year, up from about one-quarter of
the population two years ago.21 Between
2000 and 2003, family health costs rose
about 45%.22 Among low- and middle-
income households with credit card debt,
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4. [ 01.22.2009 ]
Supplemental Health Insurance: A ‘Must’ for Americans in the Current Economy
A Solution Buyers’ Guide
American families have a choice: They to Supplemental Insurance
can be victims of circumstance, or they An individual in the market for supple-
can find solutions that can help them mental health insurance should look for:
maintain their standard of living in the
event of a major illness or accident. • Lump-sum benefits, which are paid
Supplemental health insurance is a viable when the consumer is diagnosed with a
solution, providing policyholders the common catastrophic illness. American families
financial assistance to pay bills and main- EXAMPLE: A supplemental cancer have a choice: They
tain their household’s solvency through plan would pay an insured single
can be victims of
periods of illness. mother a $10,000 cash benefit if she
were diagnosed with breast cancer. circumstance, or they
Cheaper than fast food?
Health insurance is more affordable than • Indemnity benefits, which offset
can find solutions
you might think. While premiums vary, medical costs associated with hospital that can help them
the average annual cost of supplemental and ICU stays, chemotherapy, radiation maintain their standard
health insurance is on par with many and corrective or preventive surgery.
non-essential expenses people willingly of living in the event
EXAMPLE: An insured factory
incur on a regular basis. worker who is hospitalized with an of a major illness or
appendectomy could use his daily $200 accident. Supplemental
COMPARE THE COST: hospitalization benefit to help pay for
health insurance is a
expenses associated with a stay in the
Two lattes a week for one year $442 viable solution.
hospital. This could eliminate the
Going to a movie twice a possibility of using his hard-earned
month with your spouse— $670 savings as a safety net.
including popcorn and sodas
• Transportation benefits, which help
Two fast-food meals a week insured persons cover the cost of
$725
for one year
travel to and from a medical center
for treatment. This benefit is especially
Half a pack of cigarettes a day $820
important for those who live in rural
areas, where transportation and
lodging expenses typically accompany
medical care and treatment procedures.
EXAMPLE: The parents of an insured
nine-year-old child who must travel 350
miles to receive specialized treatment
could use their plan’s transportation
benefit to offset the cost of travel and
overnight stays. CIC-WP-EC (01/09) 132471
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5. [ 01.22.2009 ]
Supplemental Health Insurance: A ‘Must’ for Americans in the Current Economy
• Coverage for regular diagnostic tests, this coverage for the extra insurance on
such as mammograms, Pap smears top of our military and work benefits
and colon screenings. This option because cancer is terribly expensive.
makes it easier to afford preventive care The return-of-premium feature made it
and detect any disease when it’s easiest a win-win situation,” she stated. “The
to treat. following year during a mammogram,
EXAMPLE: A 44-year-old mother has I was told of a lump. They removed
a family history of breast cancer, so she 25 lymph nodes and performed a
mastectomy. Now I have been taking By having the
purchased a supplemental cancer policy
with wellness benefits. Her coverage cancer medication for several years. financial “safety net”
pays for an annual mammogram, Conseco has paid directly to us and the
of supplemental
which provides assurance that any money has helped—so we have had no
out-of-pocket expenses.” health insurance, more
cancerous cells likely will be detected
at an early stage. Americans can avoid
Summary the too-common
• Premium-return feature, also known as By having the financial “safety net” of
a “cash value” or “return of premium” circumstance of having
supplemental health insurance, more
rider. As the name implies, this benefit people can avoid the too-common to choose between
can return premium to the policyholder circumstance of having to choose obtaining needed
if coverage is kept for a certain period between obtaining needed medical
of time. It gives the buyer assurance medical care and
care and paying necessary household
that they will get their premiums expenses. Supplemental health insurance paying necessary
returned to them if the insurance protects against the potentially high household expenses.
coverage is not needed. personal costs of an accident or major
EXAMPLE: A couple in their 60s illness, and its cost is comparable with
have had their supplemental cancer common househould expenses.
insurance for 20 years. They bought
their policy with a 100% return of With most supplemental plans, benefits
premium rider attached. Because they are paid directly to insureds or their
haven’t had to file a claim, they recently beneficiaries, giving them the freedom
received a check for their entire paid to use their insurance benefits however
premium and decided to continue they choose. Benefits from supplemental
their coverage. policies are paid regardless of any other
insurance already in place, including
Delores Shileny of New Hampton,
employer-sponsored major medical, for
Iowa can attest to the value of
extra assurance.
supplemental coverage with the
premium-return feature. “We took out
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Supplemental Health Insurance: A ‘Must’ for Americans in the Current Economy
Ardel Fugleberg and her husband, the many nonmedical costs so they can
Randy, of Hope, North Dakota, thought focus on their health.
to supplement their major medical
Now more than ever—in a climate
insurance with a cancer plan—and
marked by an unstable economy, rising
they’re glad they did.
medical costs and increasing personal
“We always think it would only happen health care expenses—individuals should
to others, but in a split second many lives take steps to protect themselves and
“Having our Conseco
are changed with a diagnosis of cancer,” their families with supplemental health
Fugleberg stated. “Having our Conseco insurance products. cancer insurance
cancer insurance helped with many of helped with many
those additional financial concerns. Even
of those additional
with medical insurance, the expenses
added up quickly. It helped with lodging financial concerns…
and travel expenses at a time when many
References with the illness and
1
“Illness and Injury as Contributors to
family members had to take off from Bankruptcy,” Market Watch: Health Affairs, transplant, almost
work. With the illness and transplant, Feb. 2, 2005.
almost a year of work was missed to help 2
“Voluntary Supplemental Medical and a year of work was
Hospital Indemnity Plans,” Eastbridge
with his care. Our agent was very helpful
Consulting Group, Inc., p. 15.
missed to help with
and really worked hard for us when we 3
Ibid., p. 15 his care. Our agent
were going through the worst time of 4
National Safety Council: Report on Injuries
our lives.” in America, 2003.
was very helpful and
5
Ibid. really worked hard
People like the Fuglebergs made the 6
American Heart Association/American
choice to protect their own health Stroke Association, Heart Disease and for us when we were
and their finances by purchasing Stroke Statistics, 2008 Update (At-a-Glance
Version), p. 6.
going through the
supplemental cancer insurance. They are 7
Ibid., p. 35. worst time of
among thousands each year who receive 8
American Cancer Society, Cancer Facts &
cash benefits to help offset the cost of Figures 2008, 2008, p. 1.
our lives.”
life-saving care. In fact, in 2007, Conseco 9
Ibid., p. 1.
Insurance Company—a national insurer 10
“Trends in Health Care Costs and
based in Carmel, Indiana—paid out Spending,” Kaiser Family Foundation, Sept.
2007.
more than $85 million in medical claims 11
Ibid.
related to cancer care and treatment. 12
“Voluntary Supplemental Medical and
Hospital Indemnity Plans,” Eastbridge
Supplemental health insurance products Consulting Group, Inc., p. 15.
pay lump-sum and/or indemnity benefits. 13
“Trends in Health Care Costs and
These benefits are flexible enough to Spending,” Kaiser Family Foundation, Sept.
2007.
be used however the insured person
14
Ibid.
chooses—to pay medical bills through a
15
Ibid.
lengthy course of treatment or to cover
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7. [ 01.22.2009 ]
16
Mishel, Lawrence, et. al., “Less Cash in
Their Pockets,” EPI Briefing Paper #154, The benefits described in these policies do
2004. not cover all nonmedical expenses. However,
17
Ibid. the benefit payment you receive can be used
18
“Worksite MarketVision – The Employee to pay any of your medical or nonmedical
Viewpoint Revisited,” Eastbridge costs not paid by any other insurance.
Consulting Group, Inc., May 2007. These policies have limitations and
19
Watson Wyatt survey as presented at the exclusions. For costs and complete details
Eighth Annual Washington Business Group of coverage, contact an agent. Certain policy
on Health Summit. benefits, riders and features may vary by state.
20
“Flow of Funds Accounts, Balance Sheet A hospital is not a bed, unit or facility that
Tables: Total Household Liabilities,” functions as a skilled nursing facility; a
Federal Reserve, 2006. Deflated using nursing home; an extended care facility; a
CPI-U from the Bureau of Labor Statistics. convelescent home; a rest home or a home
21
“Kaiser Health Tracking Poll: Election for the aged; a sanatorium; a rehabilitation
2008–October 2008.” center; a place primarily for providing care
22
Mishel, Lawrence, et. al., “Less Cash in for alcoholics or drug addicts; or a facility
Their Pockets,” EPI Briefing Paper #154, for the care and treatment of mental disease
2004. or mental disorders.
23
“Borrowing to Stay Healthy: How Credit The facts in this document represent the
Card Debt Is Related to Medical Expenses,” U.S. population, are for information only,
Demos: A Network for Ideas and Action as and do not imply coverage under the policies
Part of the Access Project, Jan. 2007. or endorsement of the companies or policies
24
Ibid. by the cited sources.
25
“Kaiser Health Tracking Poll: Election 2008.” Products cited in this article are issued by
26
National Center for Health Statistics. Conseco Insurance Company, a life and health
Health, United States, 2001, With Urban insurance company, and Conseco Health
and Rural Chartbook. Hyattsville, Insurance Company, administrative offices,
Maryland: 2001. Carmel, IN. These policies and certain benefits
27
and/or riders are subject to state availability.
Ibid.
28
Casey, M. M., Call, K. T., & Klinger,
J. M. (2001). Are Rural Residents Less
Likely to Obtain Recommended Preventive
Health Care Services? American Journal of
Preventive Medicine, 21(3), 182-188; and
Zhang, P., Tao, G., & Irwin, K. L. (2000).
Utilization of Preventive Medical Services in
the United States: A Comparison Between
Rural and Urban Populations. The Journal
of Rural Health, 16, 349-356.
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