Wood Financial Services LLC

Open Enrollment – Do I want any add-on insurances?

Open Enrollment – Do I want any add-on insurances?

On November 5, 2021, Posted by , In Benefits,Open enrollment, With Comments Off on Open Enrollment – Do I want any add-on insurances?

Open enrollment is already a complicated decision making timeframe for many people. Especially these days, with so many people working remotely, there may not be first tier medical providers in your area.

To make things more challenging, many companies are adding lots of add-on insurance options to their open enrollment packages these days. Legal insurance, critical illness insurance, accident insurance, hospital indemnity insurance, there is a lot of fine print, a lot of salesmanship, and not great material on which to make a decision. So lots of people give in to the fear mongering, and buy all of the insurances. And indeed, for some people those do pay out, and those recipients are very grateful.

Specific Scenarios

But we can make a fairly good estimate in some of these in specific cases. Here are some of those examples.

  • If your company has an EAP, and Employee Assistance Program, that provides very simple wills for free, and that’s all you need, then this might be a good benefit to utilize.
  • If you need a more complicated will, and your company has an open enrollment benefit of legal insurance, and the legal insurance cost for the year would be less than the cost of having your will drawn up separately, then this might be a good benefit to have for the year you commit to getting your will drawn up.
  • If you have a pre-existing condition where you know you are likely to have medical episodes for which one of the medically related insurances would pay out more than your premiums (a chronic issue, being in the middle of a longer term acute issue during open enrollment that would likely persist, being pregnant), AND those pre-existing conditions aren’t excluded. Read your open enrollment paperwork very carefully to be sure about these exclusion criteria, you may have to pick up the phone and make a call to get the answers you need.

In Aggregate

And we can judge some of these as products as a whole, in aggregate. This doesn’t work with legal insurance, but it does for those insurances that are related to medical events (critical illness insurance, accident insurance, hospital indemnity insurance). That’s because there’s a term called “medical loss ratio”. MLR is the amount of the premiums that are used to benefit the customers, vs administration/benefit to the company. You know how when you’re evaluating a charity, you might want to see a certain threshold, such as 90 cents out of every dollar, going to the charity work (their program expense ratio being >=90%)? This is a similar scenario, you want to see the money taken in as premiums, going to take care of the customers/patients.

While I personally love to see a 90% charity program expense ratio, the federal government with the Affordable Care Act has requirements for medical loss ratios, typically 85% [1, 2].

How about these add-on insurance products that are not regulated in the same way? There are a variety of estimates [1, 2, 3, 4] but many of them are in the 40-55% range. That means that for every dollar these insurers taken in, they are only paying out ~40-55 cents. Some were down at 30%. That’s not a very good value for the consumer, on average.

Time may be running out

Remember, your open enrollment period may close on Monday November 15th (a common closure date), and if so you’ve got just over 1 week left to make your elections for 2022. If you’ve gotten all of your Open Enrollment questions answered, get after it!

Comments are closed.