Life insurers help people – no matter their age, their job, their gender, or their race – make certain they can plan for a secure financial future. One way is through supplemental benefit products that help Americans pay for costly expenses not covered by medical insurance.
A proposed regulation under consideration in Washington D.C. would disallow many supplemental benefits now available to American families. The proposal, published last month by the Departments of HHS, Treasury, and Labor, would treat benefits provided by all hospital indemnity, specified disease (e.g. cancer) and other “dread disease” benefits as taxable income. This would add a new tax on middle-income Americans when they can least afford it … when they are sick.
The proposed regulation also proposes changes to hospital and other fixed indemnity products that would severely threaten their continued existence and availability by changing what benefits are allowed in these products to the point where many existing policies would need to be cancelled and reissued with many valuable benefits stripped away.
A majority of supplemental products are offered by employers as part of their benefits packages. About 50% of the market pays premiums on a pre-tax basis. These proposed significant tax policy changes would force onerous administrative burdens related to wage and tax reporting and withholding on employers who offer these products.
Americans value these products which consistently show high customer satisfaction rates and extremely low numbers of complaints. They help pay for uncovered medical expenses, including high deductibles and co-pays, as well as the costs incurred when a family has to travel for specialized treatment. Unexpected expenses like these can wipe out a family’s savings.
These products protect families’ savings and are popular with unions, state employees, teachers, and other hard-working Americans.
ACLI is encouraging the Administration to eliminate or vastly scale back the proposed provisions related to fixed indemnity products. If left unchecked, the proposal will hurt consumers nationwide who enjoy the peace of mind and valuable benefits supplemental products provide.
Cindy Goff is Vice President, Supplemental Benefits and Group Insurance at the American Council of Life Insurers (ACLI), where she develops and implements state and federal public policy positions and strategies to ensure access to innovative financial protection products. She has also served as Director of Health Policy for Aflac and VP of Product Policy at America’s Health Insurance Plans.
