Bridging the Gap With Supplemental Insurance

Supplemental insurance, more commonly known as indemnity or ancillary, works along with a major medical plan, more commonly a High Deductible Health Plan. The IRS defines a High Deductible Health Plan (HDHP) as a plan having a deductible of at least $1,300 for an individual, and $2,600 for a family. As the name implies, supplemental insurance helps pay for medical costs that occur before reaching the deductible, which has led to people calling it “insurance on insurance”.

By raising the deductible on the major medical plan, you will see the biggest impact. Supplemental Plans have been growing in popularity as a solution to reduce overall out-of-pocket costs and supply better access to healthcare. With the changes brought on by the Affordable Care Act, insurance premiums and health coverage deductibles are on the rise. It is important to note that supplemental health insurance is not major medical nor ACA compliant. It is an ancillary policy providing support to your primary insurance policy.

What does Supplemental Health Insurance Cover?

A supplemental insurance plan is simple, it pays a a flat dollar amount to the insured as a result of a diagnosis or services received. Benefits are predefined in the Schedule of Benefits up to a maximum benefit amount. These plans may have their own deductible or coinsurance requirements which the subscriber must meet prior to plan reimbursement.

A supplemental plan pays the amount applied to the insured’s major medical deductible and coinsurance. It covers the same expenses as the major medical plan except for charges for professional fees in a doctor’s office or medical clinic, outpatient prescription drugs, vision, dental, and plan copayments.

Is Supplemental Insurance worth it?

This will depend on an individual's circumstances. Those with extensive or on-going medical issues and high out-of-pocket costs will find the merit in a low-cost supplemental plan. On the other hand, healthy individuals with no planned medical expenses in the future may not see the value in supplemental insurance. While individuals will have to pay a monthly premium for the additional insurance plan, they still reduce their overall maximum out-of-pocket costs. This is important since, as the cost of healthcare continues to rise, individuals salaries may not be enough to cover the cost of their monthly health premium and their health insurance deductible.