Covering Childhood Disabilities

This insurance—children’s disability coverage—is based on a European model of coverage, correct?

The initial idea came from one of our founders, Snaebjorn Gunnsteinsson, who is from Iceland. In Nordic countries, they do a very good job of taking care of parents if their child is severely sick or has a long-term hospitalization. His sister-in-law had a one-and-a-half-pound baby that was in the NICU [neonatal intensive care unit] for four months. In places like Iceland and Sweden, they just pay parents to stay at home knowing that they aren’t able to work and going to have to take time off when something like this happens. This caused him to start studying the issue of child disability in the United States.

What is the impact on the workplace for people who have children with severe illnesses or disabilities?

It’s the largest uncovered risk for parents in the United States today. When a child is disabled and you have a dual-income family (which 70% of families are) somebody has to raise their hand and quit to go take care of that child for months, years, or permanently. So, they go from two incomes to one and have all of these expenses on top of that. These expenses can be millions of dollars when you add up lost wages, out-of-pocket costs, and caregiving costs, over many, many years. It is a huge uninsured risk. You can financially prepare; you can do all the things you’re supposed to do. And if your child was born with a rare disease or Down syndrome, or gets in a car accident when they’re 16, these are all things that are completely unexpected that can really change the trajectory of the entire family’s financial and emotional existence.

There are no other benefits that help families in these situations?

There really isn’t anything that we do in the United States for families beyond a very limited Social Security benefit. This is for people that are at or below the poverty line and it’s almost impossible to get for most families. The programs that are available can take three or four years to get and they are incredibly complex. And then the benefit may be getting a caregiver sent to your home, and often those caregivers are completely unqualified to care for a special-needs child.

What would you compare this coverage to what is already on the market?

It’s much like life insurance or long-term disability insurance. It’s really about income replacement. If somebody is 40 years old, they have a family and they pass away, there’s years and years of lost earnings. That’s what life insurance is for. Or if they become disabled for a long period of time. You can’t work. Disability insurance also replaces earnings.

What kind of conditions are covered under these plans?

We cover anything that creates a severe disability in a child. It took about five years for us to build this in a way that was fair, consistent, and that delivers the right benefits. So, what a severe disability means is, it could be from an injury, it could be from a condition or a disease. It can be anything that might happen to a child that creates a situation where they’re two standard deviations away from how a normal child of their age would function. We cover conditions that are going to make that child become significantly off-track. So it includes things like severe autism or Down syndrome, that make it so a child will need either long-term or permanent caregiving. There are 7,000 rare diseases that affect children. We cover any of them that would impact a child and create a disability.

Do you cover only long-term conditions or short-term ones as well?

Typically, long term. We do cover kids if they’re in the hospital for 30 days. So, cancer is a good example of something that may be really difficult for a couple of years and then they beat cancer and they’re OK. That’s something we would cover, but many of these things are permanent conditions.

How does the benefit work?

Your medical insurance covers therapies, hospitalization, and drugs. What parents are left with is the aftermath when the child comes home from the hospital and they have to stay with the child all day. They have to outfit their home, outfit their car. They have a permanent, long-term care responsibility for that child. There’s nothing that covers that. The two major expenses that are uncovered are caregiving expenses and loss of income if you have to quit your job. If you try to go back to work, you’re going to have to pay for caregiving, to the tune of $100,000 a year or more. Somebody has to take care of the child and it costs you your job or costs you more money for a caregiver than most Americans probably can afford.

Benefit payouts range from $50,000 to $500,000 and it’s a cash benefit. We pay it out monthly over time. And we pay it out based on the severity of the disability. Parents can use it for whatever they need to use it for.

This seems like a niche benefit— one that just a small number of employees might need. How do you convince employers that it’s something they should consider?

That’s sort of like saying life insurance is a niche product…. This is about protecting everyone from the unexpected. Child disability doesn’t happen very often, so it’s like saying that we don’t die prematurely very often. It’s about the idea that, if that happens, it’s financially devastating for families. As an employer, you are in a unique position to offer financial protection and provide life-changing benefits to any families that ever need it.

How does the employer pay for this benefit?

The employer can pay for it and every employee and their kids are covered. Or the employer can pay for some of it and then have the employee pay the rest. Or the employee can pay for the whole thing as a voluntary benefit. And that’s up to the employer to decide how they want to deliver. It costs about the same as life insurance or long-term disability insurance and it has a similar level of benefits, incident rates, and premiums.

Do you work with all sizes of employers for these plans?

We have a lot of very large employers that want to be early adopters of this and get it in the hands of their employees. They’re very, very large employers. We found that large employers understand why this is important. They understand the impact on parents and employees in the workforce because they see it in their own populations. In a 50,000-employee company, this happens twice a week. In these large companies, there’s two employees a week that are having a new child with a disability or have a severe childhood health event that’s going to lead to a disability. And in many cases, that employee is going to have to leave the workforce and lose their career as a result. For employers, if it’s affordable and in their budget, why wouldn’t they want to help people with things that are happening all of the time?

Do you plan to work with smaller employers in the future?

First, we started with Fortune 500 companies because it’s easier to reach them than it is the millions of companies that make up the mid-market and S&P with a small team. Second, small companies follow what the big companies do when it comes to benefits. Third, these big companies have really big benefits departments that study what their employees need, and where the gaps are. And they’re focused on always being a little bit better, always filling in these gaps for employees. And when you have 100,000 employees, it’s like managing a city. You have all the problems that any city has and you’re just constantly trying to improve on what you’re offering your employees so you can attract or retain them and make them more productive. You can go to these employers and show they have a gap in benefits and they have the resources and the people to make it happen. Those are all the reasons we started with large employers, but we expect to have this available for employers all the way down to 200 employees in this coming year.

You mentioned that it took five years to come up with this benefit. Why so long?

If you’re offering a benefit of $500,000 per incident, that’s a large amount of money for an insurance company to pay for one claim. Insurance companies have hundreds of millions of dollars on the line when we sell this policy. We had to make sure they felt comfortable that we know the right way in which to design the policy so that the claims we get are in line with what we expect. You can go sideways and lose lots of money very quickly. We had to get the policy in a place where we had a comprehensive benefit that was fair and consistent in the way that we adjudicated the claims. We also had price stability to make sure that financial institutions who are taking the risk are comfortable. It takes a lot of math and you’ve got regulatory hurdles for how to deliver this as well. So, there’s all sorts of barriers to this. Not to mention the fact that nobody had ever done it before in the United States and no one has ever done it as a group employee benefit before.