Supplemental Benefits

Model 171 Benefits Overview

Presented to the NAIC Accident and Sickness Minimum Standards (B) Subgroup

Cindy Goff

ACLI

September 20, 2021

Types of Products Regulated in Model 171

 HIPAA Excepted Benefits

 Supplemental Benefits

 Accident-o n ly

 S p e c ifie d Dis e a s e

 C ritic a l Illne s s

 Ho s p ita l in d e mnit y or O th e r Fixe d Ind e mn ity

 Expense -based Benefits

 Dental

 Vis io n

 Income Replacement

 Short-Te rm Dis a b ility Inc o m e

 Lo n g -Te rm Dis a b ility Inc ome

• Non-HIPAA Excepted Benefits

• Short-term Limited Duration Insurance (STLDI)

What are HIPAA Excepted Benefits?

 Th e He a lth Ins u ra n c e Por ta b ility a nd Ac c o u nta b ility Ac t o f 1 9 9 6 (HIPAA)

established “excepted benefits” as a broad category health insurance

products that are regulated differently than major medical products

 These products are excepted from federal regulation and primary regulatory

a uth o rity lie s a t th e s ta te le ve l.

 HIPAA excepted benefits are not subject to the Affordable Care Act (other

than pediatric dental and vision which are part of an essential benefit package)

 Congress and Federal Government define how benefits qualify as HIPAA and

AC A-excepted

 C MS for in d ivid u a l p ro d u c ts

 CMS, Treasury and Labor for group products

What Are HIPAA Excepted Benefits?

• 4(a) Benefits not considered health coverage:

• Accident-O n ly

• Accidental death and dismemberment

• Disability Insurance (short and long-term)

• Ge n e ra l lia b ilit y a n d s u p p le me n ta l to lia b ility

• Aut o mo b ile m e d ic a l

• Worker’s compensation

• C re d it-only insurance

• On-s it e m e d ic a l c lin ic s

• 4 (b) Limite d -scope benefits:

• Limite d -scope Dental

• Limite d -s c o p e Vis ion

• Lo ng -term Care

• Health FSAs

• 4 (c ) Non-coordinated benefits:

• Specified Disease/Critical Illness

(e.g. cancer-only)

• Hos p ita l Ind e mnity o r O th e r Fixe d Ind e mnity

• 4(d) Supplemental benefits:

• Medigap

• TRICARE Supple me nt

• Employee Assistance Programs (new)

• Wra p -Around Products (new)

• Other “similar” coverage that supplements primary group health coverage

Differences Between Group and Individual

Group Individual

Employer is often the primary purchaser and holds the group

policy

Individual holds the policy

Employer issues “certificates” with benefit descriptions and “how

to use” information to the employees as they on-board – often

customized by the insurer at the employers request

Individual receives the policy and coverage documents directly

from the insurer – customized for the requirements in their state of

residence

Employees submit claims and interact directly with the insurer for

claims, appeals, and coverage questions

Employees submit claims and interact directly with the insurer for

claims, appeals, and coverage questions

Group certificates are issued based on the situs state of the

employer. All employees of that group, regardless of residence,

receive benefits specified in the certificate unless the employee

lives in a state that has legal extra-territorial authority.

Individuals’ benefits are administered by the insurers according to

the requirements of the state in which they live

Renew periodically (usually ever 1 – 2 years)

Premiums and benefits can be altered upon renewal.

Guaranteed Renewable – As long as premiums are paid the policy

remains in force and does not have a “renewal” date. Premiums

can only be changed for the entire class of policyholders.

Non-cancellable – most policies cannot be canceled by the insurer

except for specific cases of non-payment of premium or fraud

Often a portion or all benefits Guaranteed Issue – insurer does not

have the ability to assess risk of each employee on the front end

Individually underwritten – insurer can assess the risk of the

individual when they apply

SUPPLEMENTAL BENEFITS

What’s in a Name: Supplemental Benefits

• HIPAA defines “supplemental benefits” very differently than how they

have been defined by the industry and state regulators

• To d a y, we will re fe r to “s u p p le me n ta l b e n e fits ” a s tho s e fina n c ia l

protection products that are triggered by health events but are not

expense-based and are not specifically meant to replace income.

• Disability Income, Dental, and Vision coverage are often considered

“supplemental” because they provide additional benefits not covered by

ma jo r me d ic a l p la n s . Fo r p urp o s e s o f this d is c u s s io n we a re d e s c rib ing

them separate from supplemental benefits in order to make it easier to

understand their unique features.

Supplemental Benefits Product Categories

 Accident-only: Pays a benefit following an accident resulting in injuries requiring hospitalization or treatment.

Depending on the type of policy the person has chosen, benefits are paid as a lump-sum or a fixed dollar amount for

each eligible service trigger. These benefits help pay for unexpected out-of-pocket costs not covered by

comprehensive medical insurance. (exemption found in 42 U.S.C. 300gg-91(c)(1)).

 Specified Disease: Provides added protection to existing medical coverage to help cover costs when an individual is

diagnosed with a disease or condition specified in the policy. These plans pay benefits as a lump-sum (more common)

or a fixed dollar amount for each eligible service trigger. (exemption found in 42 U.S.C. 300gg-91(c)(3)).

o A subcategory of Specified Disease, Critical Illness coverage usually pays benefits in a lump sum when one is

diagnosed with one or more major illnesses (e.g. cancer, stroke, MS, etc.) that are outlined in the policy at the

time of sale.

 Hospital Indemnity or Other Fixed Indemnity: Pays a fixed amount when policy holders are admitted to a hospital or

need outpatient or provider office-visit care. These plans often pay a daily benefit for each day of hospitalization and a

fixed amount based on eligible medical event triggers. The “Other Fixed Indemnity” name was added in federal law to

reflect that often people do not require overnight stays at the hospital and therefore allows for inclusion of outpatient

and non-hospital service benefit triggers to be included. (exemption found in 42 U.S.C. 300gg-91(c)(3)).

What Supplemental (Acc, HIP, SD/CI) Benefits ARE

 Financial protection products that help pay costs not covered by medical insurance

 Not a llowe d to “c oo rd in a te ” with oth e r typ e s o f in s ura n c e

 Pay fixed amounts of benefits triggered by a medical event

 Usually pay directly to the insured

 Can be used for any purpose determined by the policyholder

 Mostly sold through the worksite (group or individual) - employers often make them

available as part of a broader benefits package

 96% of policies are made available through employers as part of the employer’s

benefits enrollment process

 group products

 individual products sold through the worksite

 4% of policies are sold with no employer involvement, mostly through direct mail or

independent agents

What Supplemental (Acc, HIP, SD/CI) Benefits Are

NOT

 Not comprehensive medical coverage or intended to be sold as such

 Do not pay directly for medical expenses or claims

 Cannot pay benefits on expense-in c urre d b a s is

 Cannot vary benefits based on other insurance coverage

 Short-term limited duration insurance (STLDI) or Health Care Sharing

Minis trie s (HC S M)

 “Min i-meds” or other types of medical expense insurance eliminated under

th e AC A

 “Junk insurance” that leaves policyholders vulnerable to uncovered

me d ic a l c o s ts

Supplemental Benefits Are Popular

There are well over 33,028,221 active supplemental individual policies and

g ro u p c e r tific a te s in th e c o u ntry, ma ny of whic h c ove r multip le me mb e rs of a

household:

*Survey of ACLI Members, April 2021. Note that this number is undercounted because several national Supplemental Benefits carriers are not ACLI members.

Policy Type Number of Policies and

Certificates*

Hospital Indemnity 4,246,838

Accident-Only 18,141,614

Specified Disease/Critical Illness 10,639768

Satisfaction with Supplemental Benefits Is

Very High

A 2020 Global Strategy Group survey of 500 supplemental insurance (Accident-

o nly, Ho s p ita l a nd O the r Fixe d In d e mn ity, a nd S p e c ifie d Dis e a s e /C ritic a l Illne s s

b e n e fic ia rie s foun d :

• 98-99% satisfaction with the service they received

• 94-95% satisfaction rate depending on product type

• 90% s a tis fa c tio n with c la ims filin g , time lin e s s o f b e ne fits , a n d a b ilit y to c o m m u nic a te with

the insurer

• 89% found benefits easy to understand and use

• 90% feel their plan was there when they needed it

• 90% believe they received value for their premium

• 89% agree that the purchase of the plan was a valuable investment

Supplemental Benefits Are Important

A few statistics on the fragility of household budgets :

 Over the past five years, the average annual deductible among all covered workers has

increased 53%. – The Kaiser Family Foundation

 45% of respondents say they have $0 in savings. An additional 24% said they only have

$1000 in savings. – GOBankSavings Survey, 2019

 About 50% of consumers with a high deductible plan say it would be hard to afford the

deductible. – PwC Health Research

 86% of surveyed employees see a need for “Supplemental” insurance and 93% of

employees stated they chose to enroll these products because they believe the policies

“help protect their financial security.” – Aflac WorkForces Report, 2020

 62% of respondents who reported having trouble with medical bills were covered by health

insurance, and 75% of insureds (with both high and low deductible plans) reported an

inability to afford copays, deductibles, and co-insurance – KFF and New York Times

survey

DENTAL AND VISION

Dental Insurance

 262.7 million Americans (80% of the population) have dental coverage.

• Em p loye r s p o n s ore d = 1 6 1 m illio n +

• Government sponsored = 85 million +

• Ind ivid u a l = 1 6 millio n +

 Coverage through employers or other groups accounts for nearly 90% of private dental

coverage.

 In the group space, employers pay a portion of the premiums around 60% of the time.

 De n ta l is u s u a lly s old separate from medical insurance.

 Dental benefits are the most requested health benefit after medical and pharmacy

cove ra ge

Dental Insurance

 Characteristics of Dental Coverage

 Often network-based – expense-based payments to the in-network dental

providers/payments to insured or provider for out-of-network

 Coverage generally at 100% for preventive services (exams, x-ra ys , c le a n ing s ,

sealants, etc.)

 Coverage at varying percentages for non-ro u tine s e rvic e s (fillin g s , e xtra c tio ns ,

soft tissue treatments, root canals, crown, bridges, dentures, orthodontics,

emergency services and anesthesia)

 Average premium $35/mo (could vary by region)

 Average annual deductible $50 - $100

 Average annual maximum benefit $1500 - $2500

Vision Insurance

 Ch a ra c te ris tic s o f Vis io n C ove ra g e

 Ne twork-based

 Our-of-network coverage based on reimbursement amounts

 Annual eye exams covered in full after copay

 Eyeglass lenses covered in full after copay

 Eyeglass frame and contact lens allowances between $130 - $200 (every 12 – 24 mo)

 Discounts for lens coatings and sunglasses; discounts for corrective surgery

 Average premium $11/mo

 Ave ra ge c opays $0 - $25

INCOME PROTECTION

Short-Term Disability Income Insurance

Replaces a portion of a person’s salary when they must take time off from work due to

a s e rio u s illne s s or injury

 40% of the workforce currently has short-te rm d is a b ilit y th ro ug h the ir e mp loye r (6 2 millio n worke rs – this

does not count workers that pay the premium entirely themselves)

 Employers often pay all or a portion of the premium for short-te rm d is a b ility in s u ra n c e

 Premiums tend to average $4 - $5 per week

 On average, the private insurance industry processes 2,002,000 claims annually

 Typ ic a l b e n e fits

• 22 – 26 weeks of paid leave

• 60 – 70% of wage s replaced (there are a ls o ind e mn it y-type products that s e ll coverage in d o lla r increments)

• Trained medical and vo c a tio n a l e xpe rts to assess and assure appropriate le a ve duration and resources are

a va ila b le to the worke r

• Assistance in tra ns itio n in g to different type s of le a ve (e.g. m a te rn it y to bonding, short-term d is a b ility to lon g -term)

• Re turn-to-work programs (e.g. s p e c ia l accommodations, workspa ce mo d ific a tio n s , work re -entry p la n s ,

p re ve n tio n of re -injury p la n s )

• C la ims are re vie we d to assure they meet d is a b ility e lig ib ility c rite ria . 88.2% of c la ims are approved upon firs t

review.

Long-Term Disability Income Insurance

Replaces a portion of a person’s salary when they are unable to work for an extended period of time (after short

te rm d is a b ilit y is u s e d )

 Approximately 37% of the workforce currently has long-te rm d is a b ilit y th ro ug h the ir e mp loye r

 Employers or employees, or a combination of both normally pay the premium

 Premiums ranges from $25 to $500 per month based on income level and duration of coverage

purchased

 Typ ic a l b e ne fits

• Usua lly has a 90-day elimination period, often covered by short term disability income insurance

• Benefit period usually sold in year increments, usually 5-year, 10-year, 20-year, or even until retirement age.

• 50 – 70% of wage s replaced (depends on coverage selected)

• Trained medicaland vocational experts to monitor progress and assure recoveryresources are a va ila b le

• Assistance in transitioning to different type s of le a ve (e .g. permanent d is a b ilit y status with S S A)

• Re turn-to-work programs (e .g. vocational tra in in g fo r new careers, specialaccommodations, workspace mo d ific a tion s , work re -

entry p la n s , etc.)

NON-HIPAA EXCEPTED

BENEFITS

Short-term Limited Duration Insurance

 Temporary primary coverage for people in transition

 Defined in HIPAA as “not health insurance”

 Nor is it an excepted benefit under HIPAA

 The ACA did not mention STLDI so exempt from most ACA requirements

 Key Features:

 Temporary coverage (usually 3 – 9 months)

 Underwritten; pre-exes allowed

 An nu a l limits a llowe d

 Usually not network-based coverage; sometimes crafted with indemnity-type benefits rather than expense-based

 Va ria tio n in wh ic h AC A e s s e n tia l b e n e fits the y c o ve r

 O b a m a Ad min is tra tio n lim ite d th e ir d u ra tio n to 3 mo nths ; Tru mp re turne d limit to 3 6 4 d a ys ,

a llowin g two re n e wa ls ; Bid e n ?

QUESTIONS?