Cancer Insurance: Is It Right For You?

By Sally Esteb Cureton, CPA and Dave Cureton, cancerpage.com

Have you ever wondered whether it might be a good idea to buy separate insurance against cancer?  Perhaps a friend or relative has cancer insurance or you’ve seen it advertised, often along with the sobering reminder that men in the United States have a one-in-two lifetime risk of developing cancer, women a one-in-three lifetime risk.

With odds like that, it seems, why would anyone not at least consider buying a cancer insurance policy, especially when it can cost as little as about 50 cents a day?

Perhaps you’ve also heard that some states used to outlaw cancer insurance and that it’s still prohibited in one state.  Why would anyone want to keep you from buying relatively inexpensive insurance against such a relatively common and often devastating disease?

What About The Policies?

First off, of course, cancer insurance is only available to people who haven’t been diagnosed with cancer, though some companies may sell policies to people who have had cancer and have gone at least five years without needing any further treatment.  These policies might not pay if it’s later determined that the insured already had cancer at the time the policy was purchased, but didn’t know it.

Benefits offered under cancer insurance policies may be wide-ranging or fairly specific and payment may be in the traditional manner or simply in a single lump sum once a cancer diagnosis is confirmed.

AFLAC (American Family Life Assurance Company of Columbus), a leading supplemental insurance provider, offers such benefits as cancer screening and home health care in addition to payments for hospitalization and for radiation treatments and chemotherapy.

AFLAC’s Katie Dyke told cancerpage.com that monthly group rate premiums, paid through payroll deduction, range from $15.90 per month for the lowest level of coverage for an individual to $45.50 per month for the highest level of coverage for a two-parent family.  (More than 95% of AFLAC’s policies are issued on a payroll deduction basis.)

To cite another example, Alabama-based Protective Life Insurance Company offers individual coverage in its home state starting at $15.95 per month (age 45 and below) and family coverage starting at $27.95 per month. (Protective Life advertises the same rates for direct payment or payroll deduction for policyholders age 45 or younger.)  Benefits include $180 for each day in the hospital for cancer treatment, up to $3,000 for each surgical procedure and up to $300 per day for radiation treatments or chemotherapy, whether in the hospital, a doctor’s office or at home. 

But even companies that sell cancer insurance will tell you it is designed as supplemental coverage, never as a substitute for a good comprehensive health insurance plan.  Some states drive this point home by restricting sales of specified disease policies to people who already have a comprehensive plan.

Concerns that consumers might easily be misled on this point or that such policies might unfairly exploit peoples’ fears once led some states to prohibit the sale of cancer insurance and other specified disease policies.

Some States Say “No”

New Jersey is now the only state that still outlaws specified disease insurance across the board, but that could change as early as October 2000.  A public hearing on allowing the sale of such policies was held in Trenton in February and Bill Heine, a spokesman for New Jersey’s Department of Banking and Insurance, told cancerpage.com that proposed regulations to govern the sale of specified disease insurance are now being drawn up.

Heine said those regulations are expected to be published in September.  Then, after a 30-day period for public comment, New Jersey Insurance Commissioner Karen L. Suter will have a year to decide whether to lift the ban.

“We recognize that, nationwide, about ten million people have cancer insurance,” said Heine,  “and many of them are here in New Jersey,” having purchased their policies when they lived elsewhere.

But Suter clearly wants to keep a close watch on cancer insurance it she decides to lift the ban. She’s drafted a list of 20 requirements that might be imposed on sales of cancer insurance and other specified disease policies.  Among them:

• Proof that the purchaser already has basic health insurance.
• Prior approval by the state of all advertising and marketing materials.
• Limits on commissions and administrative fees.
• A minimum loss ratio of 75%, meaning the insurer must pay out at least 75 cents for every dollar in premiums.
• No medical underwriting, meaning insurers could not refuse coverage, for example, on the basis of a person’s family history of cancer.

Massachusetts in effect outlaws cancer insurance for many of its residents.  Specified disease insurance policies cannot be sold to individuals in Massachusetts and is indirectly frozen out of all but the large-group market.

Ken Beagan, Director of Health for the Massachusetts Division of Insurance, told cancerpage.com that in 1996 the legislature decided that individuals – people not eligible for any group or government health insurance – can only be sold a “one-size-fits-all” comprehensive policy.  There are a few exemptions, Beagan said, for other types of coverage, such as long-term care, but there is no exemption for specified disease policies.

For the small-group market (up to 50 employees or members), Massachusetts requires that all health insurance offered be “guaranteed issue.”  That means a company offering cancer insurance might have to insure people who already have cancer.

New York State lifted its ban on specified disease insurance in 1998 after 26 years, but requires that purchasers first have basic coverage.  Terri Marchon of the New York State Insurance Department told cancerpage.com that a purchaser must be asked on the application form for cancer insurance or any specified disease coverage whether he or she has medical insurance with a maximum benefit of at least $100,000 or basic hospital and medical coverage in force.  The sale can proceed only if the answer is “yes.”   Just to be certain, New York requires that the purchaser must be asked the same question again – in writing – within 30 days of the specified disease coverage taking effect If the answer isn’t still “yes,” the specified disease policy must be voided and the premium payment refunded.

Consumer Experts Say Watch Out

While state insurance regulators and legislators send mixed signals on cancer insurance, consumer advocates call it a bad buy.

Gail Shearer of the Washington, DC, office of Consumers Union told cancerpage.com that her organization questions the value of any type of limited-coverage policy when it comes to health insurance.  She advises anyone considering buying cancer insurance to “look upon this less as an insurance policy and more as a risky investment.”  And Shearer said she’d advise anyone with good comprehensive health insurance who has cash to spare for additional coverage to spend it instead on lowering the deductible or increasing and expanding the benefits of the existing coverage.

What Is Best?

You should be very careful about disease-specific insurance of any kind. Even if you are convinced that – because of your family medical history or for other reasons—you may be predisposed to cancer.   The best choice is always the most comprehensive health insurance you can afford, along with disability insurance to help replace lost income if you are unable to work because of illness or injury.

Look for a complete health plan with a lifetime benefits limit of at least one million dollars. AS the Consumers Union spokeswoman stated above, the money you would have spent on cancer insurance can be better spent expanding your existing coverage or lowering its deductible.  Another option is to simply put that money into a savings account, or other readily available secure investment, and use it to pay for health care expenses not covered by your insurance.

If you were concerned that you could still be overwhelmed by a costly, protracted medical crisis, another alternative would be to buy catastrophic coverage.  This type of policy will have a very high deductible, but will also have a higher lifetime limit on benefits than standard medical insurance.

For example, a catastrophic major medical insurance group plan offered to members of the American Society of Mechanical Engineers and underwritten by The United States Life Insurance Company in the City of New York provides up to $2 million in benefits per benefit period, usually five years.  With a $50,000 deductible, the cost for this policy would range from $76 per year for an individual under 40 to $281.20 for an individual age 60-64.

If Medicare covers you, buy a Medicare supplement (Medigap or Medsup) policy.  You have a built-in protection against paying for coverage you already have.  The Health Insurance Association of America notes that insurers are not allowed to sell a Medicare recipient any policy that would duplicate benefits.

If you are determined to purchase cancer insurance, keep these points in mind:

• The policy should cover expenses not covered by your other insurance.
• Double coverage will not necessarily mean double benefits.  Supplemental policies sometimes advertise that they will pay no matter what your other insurance pays, but your regular health insurance may not pay in cases of duplicate coverage.
• Coverage only if you’re hospitalized or only after you’ve been hospitalized for a certain period of time may mean no coverage at all.  Cancer patients often receive outpatient treatment.  The National Association of Insurance Commissioners says the average hospital stay for a cancer patient is only 13 days.
• Your state may have special requirements or restrictions regarding cancer insurance policies.  Check with your state insurance office.  (See the link below.)
• Remember that you may not be covered by a cancer insurance policy if it’s later determined that you had cancer at the time you applied for the policy, even if you didn’t know it.

Finally, whatever you do regarding insurance, ask lots of questions and seek objective information and advice from sources that have no financial interest in your decision.  Above all, do not allow yourself to be driven by emotion or manipulated by advertising that plays on fear.    

RESOURCES:

• Health Insurance Association of America
• To quickly access the website of any state insurance regulatory agency click on:
  www.naic.org/consumer/state/usamap.htm

NOTE:  cancerpage.com information relating to personal finances is for general guidance on matters of interest only and is not intended to render legal, accounting, tax or other professional advice, or to serve as a substitute for consultation with competent professional advisors.  For advice regarding your specific circumstances, you should consult your own financial, tax, legal or other professional advisor.