posted by Winthrop Cashdollar, Executive Director of Product Policy, AHIP
on April 3, 2018
If you or a loved one has a serious illness or injury, it’s stressful and scary. Improving your physical health is essential—but so is protecting your financial health. Why? Because research shows how a hospitalization can lead to a significant long-term reduction in income. That’s why disability income protection is so important to your financial health.
The New York Times recently published an article, “Getting Sick Can Be Really Expensive, Even for the Insured,” highlighting the consequences of not being financially protected.
Just look at what can happen after being hospitalized for an illness or injury. “On average, people in their 50s who are admitted to the hospital will experience a 20 percent drop in income that persists for years.” This means workers will be hit by income losses that dwarf the cost of their actual medical care.
Income reduction post hospitalization reflects the diminished ability to work—or an inability to work at all—due to illness or injury. Most of the long-term drop in income (about 60 percent) is attributable to those who never returned to work after their hospital stay, the article notes. Of the people in their 50s admitted to the hospital, about 1 in 10 never went back to work. Both those with and without medical insurance faced a substantially higher risk of bankruptcy after leaving the hospital.
“In the past few years there has been a public focus and debate on the ACA, along with public awareness of the increasing cost of healthcare. Meanwhile, this has distracted from the reality that medical costs are only part of the loss associated with serious health issues, and that the need for disability income protection insurance is just as basic as the need for medical coverage,” said Marty Traynor, Vice President, Voluntary Benefits, Mutual of Omaha. “In addition, insured products like critical illness and accident coverage can pay benefits in addition to medical plans—to help relieve the financial stress associated with non-covered expenses. These products help customers focus on the more important things, like treatment, recovery and maintaining family lifestyle.”
It is crucial to have comprehensive medical insurance coverage. But as this research shows, medical insurance is only part of the financial security solution. When a person can’t work as much—or can’t work at all—it can create severe financial hardship.
“When it comes to disability or chronic illness, the out-of-pocket costs can be catastrophic—even for people with major medical insurance,” explains Matthew Owenby, Senior Vice President and Chief HR Officer of Aflac. “The Aflac WorkForces Report, an annual study of employee benefits, consistently finds that individuals aren’t prepared for the unexpected costs associated with injury or illness. In fact, 65 percent of employees say they could only spend less than $1,000 if an unexpected serious illness or accident occurred today. When looking at the estimated costs of these types of health events, many Americans are one medical event away from major financial stress.”
Disability income protection coverage helps working Americans replace income lost if they become too sick or hurt to work. This coverage protects your paycheck so an ill or injured worker can keep the bills paid without raiding retirement savings or going into debt. Unfortunately, more working Americans lack disability income protection coverage than have it. Only about 1 in 3 Americans working in private industry is covered against the risk of long-term disability, according to the Bureau of Labor Statistics of the U.S. Department of Labor.
AHIP and its disability insurer members work to raise public awareness of the financial risk of work disability and to promote public policies to extend private disability income protection to more working Americans.