How Voluntary Benefits Work With a COVID-19 Diagnosis
Updated: May 24, 2020
We're getting a new-to-the-industry question from the group benefit brokers, employers and HR professionals we work with: What voluntary benefits can be used to provide financial protection if someone is diagnosed with COVID-19?
The good news is that many voluntary benefits were designed for just this kind of situation: to help provide a financial safety net in case of an unexpected illness or injury. There is a well established set of traditional voluntary benefit products that many people already have access to, or that employers can easily add to their benefit package, that will provide benefits for a COVID claim.
Equally good news is that insurance carriers are becoming more agile at bringing products with topical features to market. Some target specific illness types, like infectious diseases, while others provide benefits to people with specific job-related hazards (think "Occupational HIV" benefits built into critical illness plans for hospital workers). Some even aim to provide not just financial, but emotional resources during recovery. COVID-19 is specifically referenced in the marketing material from more than one VB carrier that I've seen recently. Maybe that's just good marketing, but the products don't just talk the talk, they pay claims too.
There are a lot of great suggestions for coronavirus protection online. This article is going to stick to insurance options.
Classic Voluntary Benefits More Relevant Than Ever For COVID
Some of the oldest, most well established voluntary benefits plans are going to provide the broadest support during a COVID claim. These are programs that are meant to pay benefits directly to the policyholder (or their beneficiary) for illness, injury or death. The benefit money can then be used for any medical, or nonmedical, expenses at the discretion of the insured.
To put them into three general categories, let's call them disability plans, hospital indemnity plans and life insurance. All of these have been on the market for years and would protect an individual in the same way for a car crash that they would for COVID.
Short term and long term disability are the foundation of income protection. For a COVID-19 claim a short term disability plan would pay a portion of the employee's paycheck starting after a period of missed work, typically one to two weeks. Short term disability plans will pay benefits for as short as 3 months or as long as 2 years depending on how they're set up.
For longer claims, a long term disability plan could kick in after the benefit period for STD has expired. With the right disability plans in place, a COVID claim with a short recovery time would pay benefits until the employee was able to return to work, but a worst case scenario with ongoing complications could generate benefits up to Social Security Retirement Age.
Hospital Indemnity Plans
Hospital indemnity plans pay a benefit when an employee is hospitalized for illness or injury. Some plans are basic -- they only pay a lump sum benefit for hospital admission. Others have more features, including benefits for emergency room visits, surgeries and time in a step-down or recovery unit. This could be a huge help for a COVID-19 patient with a high deductible health plan, because that hospital stay is going to trigger some significant out of pocket costs, and that's before you factor in missed work for the patient and potentially for their caregivers.
The coronavirus pandemic has generated some very clickable headlines about consumers panic shopping for life insurance. Sometimes it takes a crisis to make you take stock of whether your house is in order. A well rounded voluntary benefits offering is going to include a variety of life insurance options, term and permanent, to help employees prepare for the worst, viral or otherwise. Life plans with living benefits could pay a COVID claim while the policyholder is still alive, like with a permanent life with long term care plan that allows the death benefit to fund home or in-facility care when the policyholder can't perform two of the Activities of Daily Living for an extended period.
This consumer is panic shopping for wipe insurance.
New Plans and Features Address Specific Illnesses Directly
Outside the voluntary benefit plans that happen to catch COVID claims under a very broad definition (missed work, hospitalization, death), we're seeing more plans include features for much more specific categories that could also be triggered by a COVID diagnosis.
Critical Illness Riders
Many Critical Illness plans have moved beyond their traditional configuration -- lump sum benefits for major health events, like heart attack and stroke -- to offer benefits for other very serious illnesses. There are multiple products available with an Infectious Disease option as a rider, usually with a specific list of covered diseases attached. If the concern is paying a potential COVID claim, we would vet the carrier first for a client, to make sure that their product will definitely pay out.
Bundled Supplemental Plans
The category of plans that serve as a catch-all for the out-of-pocket exposure from a high deductible health plan has expanded beyond hospital indemnity and gap plans to include plans with a little bit of benefit for a lot of different situations. Think a little bit of accident coverage, a little critical illness, a little hospital all in one.
I came across a new Aflac plan claiming to be among the first of it's kind for COVID. It updates their BenExtend bundled plan and makes it BenExtend for Diseases by making the mix a little bit of hospital indemnity, a little critical illness and a little life insurance. They make sure to name COVID-19 specifically as a covered illness for diagnosis and treatment claims, as well as for an annual health screening benefit.
In addition to paying benefits for diagnosis and treatment... it also provides coverage when recovery gets more difficult. (Aflac BenExtend for Diseases)
Trauma And Recovery Care Plans
Interesting new voluntary benefit products keep moving from the fringe to the mainstream, so here's one underwritten by Lloyd's of London that offers benefits for an infectious disease contracted at work or school, but also for recovery care and counseling for being part of a violent incident. Benefits include generous income replacement for missed work, access to counseling and even benefits for caregivers. This is an interesting one to me, it might get it's own article.
Some Timely and Timeless Advice
Even though the question my clients are asking is extremely of-the-moment, in the end the answer is a classic: There are many voluntary benefit options that belong in every benefits package, because they protect employees from a wide variety of life's unexpected events, including COVID-19. There are new voluntary benefits and plan features coming into the market all the time that you should be aware of, because many include innovations, timely updates and improvements on older plans. And as always, whether you're a benefits broker, employer, or HR professional you should be partnered with a firm that specializes in these plans, who can help you make sense of it all.