Opioids' Impact on Group Life Morality
The opioid epidemic is in the news on a daily basis. The crisis is widespread geographically and demo-graphically, with general population opioid-related death rates quadrupling since 1999. Information developed by the Centers for Disease Control (CDC) (Figure 1) indicates that there have been multiple waves of general population deaths attributable to various types of opioids.1
The general population opioid-related mortality trend offsets some of the mortality improvements arising from medical advances in the areas of cancer and other diseases. Opioid death rates are increasing across many segments of the population, with males and younger ages showing the most notable spikes.
While the opioid crisis touches all subsets of the U.S. population, a 2017 Munich Re, US (Life) study indicates that substance abuse mortality rates among the college-educated population have been much flatter than for the general population.2 The study posited the college-educated population to be a reasonable proxy for the individual life insurance base, and confirmed that opioid death rates in this population have not been materially increasing. But what about group life insurance?
Group life data points
Group insurers do not collect complete person-level exposure data for their policyholders, so it’s not feasible to perform a comprehensive, cross-industry study on group life opioid-related mortality rates. But we can use other sources to estimate and explain the impact of opioids on group life insurance.
Earlier this year, Munich Re, US (Life) surveyed 18 leading group term life carriers representing roughly 90 percent of the market and learned that the majority of these carriers have been tracking opioid death claims over the past few years. The general finding is that group life opioid claim costs were up slightly in 2017 for some, but not all, carriers. The impact was not sufficiently material to warrant pricing changes, and the group life industry as a whole had favorable mortality results in 2017. This paints a picture (Figure 2) of group life opioid mortality falling between, but close to, the very low individual life mortality and the much higher general population mortality.
In this article we’ll explore four potential explanations of why the opioid impact on group life mortality has been less severe than for the general population:
- The group life population is a select risk pool compared to the general population.
- A large portion of group life insureds are college educated, so their opioid-related mortality expectations should be similar to the individual life findings.
- Group life policies require insureds to be “actively at work” (AAW) for a minimum number of hours, with 30 hours per week being typical.
- Workplace drug testing adds incremental protection, especially for non-college-educated and/or blue collar employees.
Group life is a select mortality pool
While carriers do not have exact person-level listings of all their group life insureds, we do know a good deal about this segment.
The U.S. workforce
The U.S. Bureau of Labor Statistics (BLS) shows there are currently about 150 million U.S. workers. The BLS chart below (Figure 3) shows the workforce bottomed out at 130 million in 2010 during the recession and has been growing steadily since then.3
Who’s covered by group life insurance?
In 2017, 48 percent of private companies with more than 10 workers offered group life insurance, according to LIMRA.4 LIMRA also estimates roughly 100 million group life certificates in force, which suggests larger employers are more likely to offer the coverage. Thus, group life covers roughly two-thirds of U.S. em----ployees, but only 30 percent of the total U.S. popu-la-tion, and roughly 50 percent of the working-aged population.
Group life product details
- For small and mid-size employers, group life is generally individually list billed, while larger groups covering 500 or more lives are often self-administered.
- The carrier receives bulk information about the total insured base, but not person-level detail.
- Group life plans generally include basic mandatory coverage, which often provides fixed multiples of salary for each employee.
- Basic group life is typically provided to all active employees on a guaranteed issued (GI) basis up
to a specific face amount such as $500,000 or
$1 million. GI limits increase for larger group sizes since they have a broader spread of risk.
- Employers generally pay a composite rate such as $0.15/$1,000/month for all basic group life insureds regardless of age or gender. The composite rate varies from case to case based on demographic make-up and group-level characteristics. Once the rate has been set, future mortality expectations can be influenced by adding or subtracting younger and/or healthier employees to the mix.
- Many plans also offer additional voluntary group life coverages which are paid for by the employee. Voluntary coverages have lower GI limits, such as $100,000 or $250,000, depending upon group size and participation levels.
- Thus, the majority of group life coverage is issued without person-level medical underwriting.
Group life mortality rates
In 2016, the Society of Actuaries Group Life Insurance Experience Committee published a study encompassing 45 million life years from 15 group life carriers.5 The study included 97,000 deaths over the four-year study period, 2010-2013. This study is significantly larger than prior SOA studies, but it focuses on just list billed basic group life exposures and deaths. Key findings include:
- The overall basic group life annual mortality rate was 2.18 per 1,000, by count.
- The basic group life mortality rate dropped to 1.27 per 1,000, by face amount. This indicates that employees with higher salaries have lower mortality rates, likely driven by factors such as healthier lifestyle, improved socio-economic status, and better access to healthcare.
- Both of these figures are well below the general population death rates for the working-aged population. The general population death rate for the working-aged population is roughly six per 1,000, or essentially three times the count-based group life death rate.
The material disparity between general population and group life mortality rates supports our thesis that the underlying populations are different, and thus the opioid effect could also be different.
Education levels and collar color
Employee education levels are not tracked in the group
life quoting and administration process, but employer industry is captured. Group life insurers have traditionally mapped the various industries into broad “collar” categories as part of the risk segmentation process.
The chart below (Figure 4) documents that 2016 SOA group life death rates vary materially based on collar category. White collar employees represent roughly 60 percent of group life face amounts, with actual death rates roughly 25 percent lower than overall SOA mortality rates, or 14 percent lower after adjusting for the age and gender mix of the white collar population. Gray and blue collar death rates and A/E results are all materially larger than the overall blended figures.
All three of these categories contain mixtures of employee education levels. We expect the white collar population will be disproportionately comprised of college-educated employees, and the majority of higher paid/higher insured white collar employees will have college degrees. Gray and blue collar groups may have large percentages of non-college-educated workers, but even these groups will contain some college-educated workers, and likely at the higher paying and higher insurance face amount levels.
A recent Georgetown University study shows 2016 marked the first time workers with at least a college degree outnumbered those with high school diplomas or less.6 36 percent of the workforce now has a bachelor’s degree or higher; 30 percent an associate’s degree or some college, and 34 percent a high school diploma or less. Most notably, 73 percent of the jobs gained during the recent economic recovery have gone to those with bachelor’s degrees or higher.
It’s difficult to identify exactly how much of the group life exposure contains the same favorable risk characteristics as the college-educated individual life population. Combining the collar category and education level data points indicates that 50 to 60 percent or more of today’s group life exposure could be college-educated, and the Georgetown study suggests the percentage should continue growing. We’d expect this subset of the group life exposure to benefit from the same favorable opioid mortality trend as the individual life population, since education status and opioid mortality rates have shown correlation, but not causation.
Actively at work requirement
The AAW requirement is a fundamental risk control within group insurance products. Those who are healthy enough to physically and emotionally fulfill their job requirements and maintain employment status will be better mortality risks than those who cannot. This requirement, along with the favorable socio-economic impact of which employers provide group life to their workers, can help explain the very large difference between basic group life and general population death rates.
The group life portability feature further illustrates the value of AAW. Some group life plans offer a portability benefit, which allows employees to maintain coverage after leaving an employer. The 2016 SOA study shows port mortality at more than 250 percent of basic group life mortality.
AAW mitigates many types of anti-selection risks within group insurance programs, and we’d expect it to provide some level of protection against excess opioid deaths as well. It seems intuitive that individuals suffering from opioid addiction would struggle to hold a full time job, if they were employed when the addiction developed. Further, there is medical literature to support the notion that unemployed and part time individuals have higher risks of non-medical use of prescription opioids, which is defined as “any self-reported use of prescription pain relievers that were not prescribed for the respondent, or that the respondent took only for the feeling or experience they caused.”7
Workplace drug testing
From a business viewpoint, we’d expect workplace drug testing to reduce the risk of excess group life opioid deaths, especially among non-college-educated employees in blue collar industries. Our research supports this opinion and provides some surprising insights. For example, a recent New York Times article highlights the challenge manufacturing and construction firms are having in hiring new employees.8 Companies are looking to hire but they’re rejecting up to 40 percent of applicants due to failed drug tests. These blue collar employers cannot cut corners on drug testing, because work-related accidents may go beyond minor injuries and result in on-the-job death.
Recent studies have shown workplace drug testing to be quite prevalent, especially among larger employers.9 The studies have consistently concluded that drug use is lower among individuals whose companies test for drugs. These findings provide additional support for the theory that group life insureds are less susceptible to opioid abuse than the general population.
Looking forward in group life
Max Blau published an article in statnews.com presenting 10 different expert projections for U.S. general population opioid deaths over the next decade.10 Projected deaths in 2027 ranged from roughly 50 percent to 200 percent of the current level, with all of the experts predicting opioid death rates will continue to increase until at least 2020. But it’s not all bad news: IQVIA reports that opioid prescriptions filled at retail pharmacies dropped by 10 percent in 2017,11 while congressional subcommittees are now pressuring pharmaceutical distributors to prevent suspicious opioid orders, and U.S. border patrol agents seized 662 pounds of heroin in 2017 – an increase of 73 percent from the previous year.12 However, none of these measures can solve the opioid crisis on its own, since tightening one aspect of the supply chain, such as retail prescriptions, may lead to increased demand from other sources. A comprehensive solution is needed.
The U.S. middle market is significantly underinsured, and group life coverage can be a vehicle to address this need. Voluntary group life insurance is an affordable option, and we also have opportunities to address the changing workforce in today’s gig economy (typically described as job-to-job employment with little security and few benefits). Group life underwriters and actuaries should consider the following items as we build products and assess risks during the uncertainties of the opioid crisis:
- Voluntary group life adds additional selection risk. Carriers should review their GI limits, and consider prescription drug checks, attending physician statements and/or opioid drug tests at specific age, gender and face amounts.
- Companies writing accidental death (AD&D) business may also want to review their drug overdose exclusion contract language to ensure it offers the desired protection.
- Ported group life loses valuable AAW protection. Carriers may want to consider a medical evidence option for the portability product, which would have lower mortality expectations.
- The value of group life’s AAW requirement may be reduced for gig economy or part time workers, since work environment and hours are less structured.
- Most carriers review their group life rate manuals every few years, analyzing actual deaths versus expected for the key rating variables. We encourage insurers to perform multivariate analysis to identify whether their overdose death trends are impacting the adequacy of specific collar color, industry or area factors for their blocks of business.
- Group insurers may want to consider reviewing an employer’s drug testing policy during the quote process.
Thriving companies in growth industries have always been attractive group life insurance clients, but perhaps even more so in today’s environment. Companies adding to staff and increasing their overall college-educated profile should be especially favorable risks as the opioid epidemic evolves over the next several years.