The Truth About Fixed Indemnity Insurance: A Must Read for Employers
January 27, 2021
As an employer, it is imperative for you to discern between truth and fiction when it comes to employee benefits and strategies.
Recently we have seen a handful of misleading news articles about voluntary benefits which could lead employers to make consequential mistakes to the detriment of their employees and themselves. Let’s take a moment to set the record straight.
So What Exactly IS Fixed Indemnity Insurance?
According to ehealthinsurance.com, “[a] fixed-indemnity insurance plan is a type of supplemental health plan that gives you a fixed cash benefit payout in case you experience specific illnesses or injuries covered by your policy.” Thanks to advancements in digital payment technologies, the cash benefit can even be paid directly to the provider with any benefit above the cost of care going back to the plan participant. Insurance Applications Group, as well as others, provide Fixed Indemnity medical coverage that pays toward doctor’s visits, emergency care, out-patient surgery and much more; coverage that is inaccessible under the average $6,000 deductible of an “affordable” ACA-compliant plan. That is why this voluntary insurance provides a lifeline for low-wage workers, who on average have less than $1000 in savings.
The Human Resources Industry Realizes the Value of Fixed Indemnity
Because of the value provided to vulnerable segments of the population, human resources professionals have increasingly recommended “voluntary,” “supplemental” or “Fixed Indemnity” as almost a necessity for low-wage workers to cover their yearly medical expenses. Companies even consider it a valuable recruiting tool. These plans provide a base level of medical coverage for the most common healthcare needs — in other words, day-to-day benefits they can actually use.
The Dissenter’s Arguments Are Weak and Uninformed
But now a relatively new think tank, the USC-Brookings Shaeffer Initiative (the “Initiative”), has made various blanket pronouncements that characterize Fixed Indemnity plans as a “problematic form of junk insurance.” The Schaeffer Initiative is focused on “Charting the Course for Medicare,” Assessing and Improving the Affordable Care Act (ACA),” and “Maximizing the Value of Innovation in Drugs and Devices.” While the cause is worthwhile, the blanket conclusions on Fixed Indemnity plans are false.
The Schaeffer Initiative arrives at its conclusions via a convoluted patchwork of anecdotal observations and inaccurate claims weaved together with an uninformed understanding of the insurance regulatory system and marketplace. The Initiative is being irresponsible at the very least, in labeling an entire class of insurance as “junk.” In one argument they claim that Fixed Indemnity was traditionally not meant to pay for medical care directly, but as an alternative source of income. In another assertion they claim paying providers directly is a “complex mechanism” which deceives families into believing that Fixed Indemnity is a primary source of medical coverage. This is hogwash and frankly offensive to those of us who take pride in delivering valuable, effective and usable healthcare coverage. Paying a medical provider directly is not a “scheme,” but a high-value convenience for plan participants, as our studies show, and as logical sense would conclude.
To Be Clear, Fixed Indemnity Is NOT Major Medical Insurance
But providers and employers alike must be clear to their employees on what Fixed Indemnity is, and what it is not. It is not a substitute, and certainly not designed to be a “red herring” for major medical insurance. Whether you call it “replacement income” (for medical expenses) or a form of supplemental insurance (as it has been defined by professionals) is not the critical point. It has limits, which is why it is far, far less costly than the unlimited coverage of ACA-compliant plans. But it also provides valuable coverage for every-day medical needs that could otherwise bankrupt low-income workers. That said, like any insurance coverage, employers must carefully review the offerings and claims made, especially by industry newcomers and potential charlatans.
There Are Bad Actors in the Field, But They Don’t Last Long
We do, however, support one of the Initiative’s recommendations, without reservation: enforcement against any who work to present these (Fixed Indemnity) plans as something other than what they are. We wholeheartedly support any and all efforts to hold sketchy companies, with misleading advertising, and questionable tax scheme’s accountable. As one of the largest providers of voluntary benefits to high-turnover, hourly industries like staffing, we consider ourselves both stakeholders and stewards of those benefit marketplaces. But we are all too familiar with bad actors in the field. In fact, in our position as respected industry professionals, we spend a great amount of time and energy educating the staffing industry and exposing sketchy schemes. In that regard, we applaud anyone’s effort to root them out.
Acting on Sweeping Generalizations Is Dangerous
That said, as a conscientious, ethical marketer of voluntary benefits like Fixed Indemnity plans, we are concerned by the sweeping generalizations, and anecdotally based (rather than evidence-based) assumptions and recommendations for regulations that may hurt the the very people the Initiative is trying to protect. By failing to understand the unintended ways the current iteration of the ACA has impacted both employers and employees in high-turnover, hourly industries like the staffing population we serve, the Initiative’s recommendations are at odds with the best outcome for certain segments of the population.
Vet Fixed Indemnity Insurance Providers
The best thing that you, as an employer, can do is to vet insurance providers, based on objective standards. What is the standard used to to determine the benefit payout? Does the Fixed Indemnity Plan cover at least most of the out-of-pocket medical expenses of your average employee? (The ESC Fixed Indemnity Plan covers a large portion of the average low-wage workers yearly medical expenses.) Does the company provide claim’s support or will your employee’s be on their own? These factors are critical in determining if the company is reputable and stable. History and reputation matter.
ESC recently earned an industry-shattering score for customer satisfaction, from an independent study, that outpaced our industry’s average score by 400 percent. As the premier provider of Fixed Indemnity Health Plans, we pride ourselves in giving our industry a path to provide for the “health and well-being” of their employees in an underserved segment of the workforce. We recently celebrated 20 years serving our clients and are proud partners with the American Staffing Association. If you have any questions concerning Fixed Indemnity insurance, please do not hesitate to reach out to us directly.
Written by: J. Marshall Dye III, the founder, President and CEO of Insurance Applications Group, a technology-forward benefits design and marketing firm creating health insurance products for specific industries and employee groups. For more insights and helpful information, visit the IAG Benefits Resources page.