The bad news is the out-of-pocket costs are so high, few can afford it.
Health reform’s Affordable Care Act and the increasing trend toward High-Deductible Health Plans have renewed interest in supplemental health insurance policies.
You may know the policies by a different name.
- Voluntary benefits
- Worksite benefits
- Supplemental indemnity plans
If I mention the Aflac duck, would that help?
Ah, the power of advertising.
So, what is supplemental health insurance and what do you need to know about it?
NOTE: This post discusses non-Medicare plans and does not include supplemental Medicare (Medigap) policies.
What is Supplemental Health Insurance?
Supplemental health insurance offers limited coverage that is designed to add to existing health insurance. Hence, the name – supplemental.
Voluntary or worksite benefits are other terms used for supplemental insurance. They specifically refer to policies offered through an employer that sponsors health benefits.
- Employees pay the full premium
- Signing up for one or multiple policies is totally voluntary
- The policies help fill gaps in the employer-sponsored health plan
Policies offered through an employer, generally, have lower rates than those sold to individuals who buy all their own insurance (for example, self-employed individuals).
Various supplemental health insurance policies may or may not be available to you. Check with your employer or with a broker or the insurance company if you purchase your own.
- Employer options – Your employer may decide to offer no supplemental (voluntary benefits) policies or may select only a few
- Policy options – Availability and policy regulations vary from state-to-state
- Purchase own – If you buy your own insurance, search for coverage using supplemental health insurance
By the way, more companies than just the duck’s Aflac offer supplemental insurance policies.
Common policies include the following.
- Accident insurance – pays a benefit directly to you for covered treatment related to an accident
- Cancer insurance – pays a cash benefit to you for a specified cancer diagnosis
- Critical illness insurance – pays a cash benefit to you for a specified critical illness diagnosis
- Disability insurance – pays a benefit to you if you are disabled and unable to work
- Hospital indemnity insurance – pays a cash benefit to you for covered hospitalization
Other supplemental health insurance policies could include dental and vision policies. A few companies offer accident & sickness policies for accidents and covered sicknesses.
In addition to the supplemental health policies, life insurance products are a common offering.
What Do You Need to Know?
You need to do your homework on supplemental health insurance.
Learn what the policies do and do not cover.
#1 – Policies may not cover your deductible.
Marketers promote policies as an answer to those high deductible plans.
Just because a charge is applied to your deductible does not mean there is a supplemental health insurance policy that will cover it.
Let’s look at an example.
In the above example, Mary’s supplemental health insurance does not help her.
- Mary was treated for an illness – not an accident
- Mary was not hospitalized
- The treatment is not covered by her supplemental health insurance policies
#2 – Not all treatment is covered.
As you saw under the types of policies, some coverage is very specific.
You may think because you purchase a Cancer policy that all types of cancer are covered.
That is not correct.
Policies are very specific on what is covered.
For example, the policy may limit benefits to the following.
- First diagnosis of cancer in an internal organ (like breast, lung or liver)
- Only covers malignant melanoma
- Does not cover other forms of skin cancer
The same is true for Critical Illness policies. Most list specific illnesses covered by the insurance.
Thoroughly read policy provisions BEFORE purchasing.
#3 – Employer-sponsored policies may require minimum participation.
Most voluntary benefits offered through your employer require a minimum number of people to sign up.
- Minimum participation helps keep rates lower
- A common minimum is 20 percent of eligible employees
- If fewer than that sign up, the insurance will not be offered to anyone
Your human resources (HR) professional will notify you if that occurs.
If you purchase your own insurance, you do not need to worry about this requirement.
#4 – Most policies require completion of a health questionnaire.
Insurance companies refer to health questionnaires as Evidence of Insurability (EOI).
- EOI is a health questionnaire for purchasing insurance
- It asks questions about your health condition or occupation
- Based on your answers, coverage may be denied or you’ll be asked to take a physical
The requirement applies to supplemental insurance offered through your employer or if you buy all your insurance yourself.
- Waiving the requirement is called guaranteed issue
- Typically, you must sign up the first year you are eligible
- If you apply after the first year of eligibility, you will be required to complete an EOI
If you have policies offered through your employer, ask about EOI requirements.
Filling the Gaps
With increasing out-of-pocket costs, purchasing supplemental health insurance can be good strategy.
- Check on what policies are available to you.
- Examine the coverage carefully.
- Choose coverage that makes sense for your health care needs.
Helping you Keep it simple, clear & uniquely yours – contact me for help with your business writing needs. Visit my business blog, Simply stated business.
Notice of Disclaimer –Cathy Miller is not an attorney or health care provider and cannot provide legal or health care advice. The information provided is for your general background only, and is not intended to constitute legal or health care advice as to your specific circumstances. We recommend you review legislation with legal counsel and visit your physician for health care issues.
BigStock Photo Credits