The growth of the voluntary benefits market has brought plenty of new players along with new products. More products mean more options for brokers to wade through, but it also means there’s a greater expectation to find the right fit for employers.
Particularly when it comes to hospital indemnity insurance, there isn’t a one-size-fits-all solution. To find the plan that works for your employer clients, there are four key things you must consider when selling hospital indemnity insurance, which covers the gap between health coverage and out-of-pocket expenses.
1. Don’t look at the hospital indemnity plan; start with the employer’s medical coverage.
The first thing you should consider when evaluating a hospital indemnity plan isn’t related to that plan at all. The employer’s medical plan should be the first thing considered.
More than many other voluntary products, hospital indemnity insurance is a companion to an employee’s major medical coverage.
The costs of spending just one night in the hospital can quickly chew through an employee’s entire deductible. We’ve all seen the statistics on what that can mean for an employee; Bankrate reports more than 60% of Americans don’t have enough in savings to cover a $1,000 expense. Taking note of the deductible on the medical plan will help provide a road map for the value employees need from a hospital indemnity plan.
It’s not all about the deductible, either. Look at some of the other medical plan features and see where there may be missing pieces. What does the medical plan offer to pay toward an ambulance ride? What about X-ray and imaging services? Where are the holes in the medical plan that you can plug should an employee have to spend time in the hospital?
2. Can the hospital indemnity plan meet the needs you’ve identified?
Now that you’ve identified the employer’s need, it’s time to start asking questions about the hospital indemnity plan. This is where things get a little trickier than you might think. Sure, you can simply find a plan that has a generous benefit to cover a policyholder’s deductible. You can also help pick up the slack where the medical plan may be lacking. But you and the policyholder will benefit from digging deeper.
A policy without sufficient benefits to cover the initial out-of-pocket cost of a hospital stay obviously won’t do much good, but you can swing too far in the other direction as well. In doing so, you run the risk of driving away potential buyers with an overly expensive product. When it comes to hospital indemnity insurance, you have to think of Goldilocks — not too much, not too little, but just right.
Hospital indemnity/supplemental medical sales declined by 1% in 2018 with total sales of $644 million.
Source: Eastbridge Consulting Group
To achieve that balance, you need a hospital indemnity product that offers you the flexibility to find the right level of protection. The solution is to find a policy that covers the needs of the medical plan; but to be successful, you have to look at how closely you can fine-tune the hospital indemnity insurance policy to the group’s specific needs.
3. What can the plan do to add value for the policyholder?
You know what is the least effective kind of hospital indemnity insurance? The kind that no one owns. Hospital indemnity insurance faces an uphill battle in that consumers don’t understand what it does or how it works. In fact, Trustmark research found that 76% of consumers say they don’t know what “hospital indemnity insurance” is. So if the product is difficult for consumers to understand and, if they don’t happen to experience a hospital stay where they can make use of their policy, you’re likely to face problems in getting employees to see its value.
To tackle this challenge, it’s important to look for a hospital indemnity plan that offers features that increase the probability that a policyholder will receive a payment. Whether that is through wellness benefits, flexibility in the use of riders and benefits, or return of premium for policyholders who don’t submit a claim, you must deliver value that employees can see and understand.
4. How does it handle changing needs?
This point overlaps with the previous point we made about flexibility. But it’s important because hospital indemnity plans must be flexible not just at time of purchase, but throughout the life of the policy. A policyholder’s needs can change. What if the employer changes medical plans? What if the policyholder starts a family and has a larger deductible? To meet these needs, a plan must offer flexibility to make changes and match needs as policyholder needs change.
Fortunately, given the expanding options for hospital indemnity insurance, you’re more likely than ever to find a product that closely aligns to your client’s needs. You just have to start by asking the right questions. The players and the products in the market may change; your ability to provide value to clients doesn’t have to.