As health insurance deductibles rise, employers are offering workers special policies to help cover out-of-pocket costs.
For many workers, paying for health care has become such a difficult budgeting exercise that the insurance industry is marketing additional products to help. So-called gap insurance, also known as supplemental or voluntary insurance, provides extra coverage for things like hospital stays, unexpected accidents or treatment for acute illnesses such as cancer or heart disease. The policies help cover the cost of high deductibles or copays for treatment—the gap that employees face before their health insurance kicks in.
NARFA has started offering voluntary benefits so members and their employees can have more protection and better manage risk and costs.
NARFA Executive Director Philip Healy says, “Many people don’t understand that there are products available that can provide additional protection against unforeseen events that could have potentially crippling financial consequences. We wanted to offer a customized voluntary benefits program to give our membership peace of mind as well as better coverage.”
Hospital-indemnity insurance helps cover hospital stays, while accident insurance assists with things like the cost of a broken leg or an emergency-room visit due to an accident. Critical-care insurance generally provides a lump sum upon diagnosis of illnesses such as cancer, heart disease or stroke; coverage amounts vary, but they often start at $5,000, with many policies in the $10,000-$30,000 range.
With rising deductibles, which have grown 49% on average since 2011, employers are offering these types of policies to help workers cover health costs.
In a recent survey of about 500 large employers that use the company’s software, 36% offered at least one type of gap insurance in 2016. During this year’s open enrollment for 2017 coverage, that share has risen to nearly 50%.
The policies generally are inexpensive, though costs may depend on age and how much coverage a worker signs up for.
Healy also went on to say, “We realize many people do not have thousands of extra dollars, specifically hourly employees. We know our voluntary benefits program provides a safety net for employees.”
Supplemental health insurance policies follow different rules than regular medical insurance. For one thing, some critical insurance policies and hospital insurance policies may deny coverage if an employee has a pre-existing condition, though most carriers will remove this provision for an employer. (Denying primary health-care coverage for pre-existing conditions is banned under the Affordable Care Act.)
Some employees, particularly those more comfortable with risk, may be better off putting their money into health-savings accounts—special tax-advantaged accounts often paired with high-deductible plans, in which they can invest their money. But if workers have a lower tolerance for risk or the policies are inexpensive, gap coverage could make sense.
At NARFA, we realize the health insurance market continues to change rapidly, and in many cases this means higher costs. It is for this reason we worked hard to put together custom voluntary benefit programs with competitive rates for our members.
Thanks to our friends at the WSJ for some of the content in this piece.