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April 04, 2012 at 09:46 AM
A few years ago, when Congress made health savings accounts (HSA) a reality, I remember getting excited and calling around to insurers to ask, “So, you’re going to be selling lots of cool HSA gap-filling products, right?”
The general response was: “Huh?”
Now, it seems as if the gaps are getting some respect. Hospital indemnity policies and accidental death and dismemberment policies are generating more buzz. Now critical illness insurance seem to be picking up steam.
One short-term reason is low, low interest rates.
When rates are high enough to generate solid returns on general account assets but low enough that the economy moves along, life insurers sell many products with long-term time horizons. All other things being equal, they like to sell lifetime annuities, long-term disability insurance and long-term care insurance under those conditions, because they can make more money on their own invests.
When the Federal Reserve Board pushes rates down to an artificially low rate, as it has today, short-term products are hot.
But another motivating factor is a combination of workers’ lack of liquid assets and the rapid increase in deductibles.
Many surveys have shown that, even at “traditional employer-sponsored preferred provider organization” plans, the typical deductible for hospital care is getting close to the minimum HSA deductible limit. Many individual health policies have deductibles of $10,000 or more.
Meanwhile, because of the effects of temporary bouts of unemployment and underemployment, the home equity value plunge, and credit card companies’ moves to lower credit limits, workers have no give in their budgets. They are tapped out, and the friends and relatives they might traditionally have turned to for help are tapped out.
