As out-of-pocket costs increase and consumer driven health plans become more prevalent, individual health insurance costs are more than just premiums. Is there such a thing as supplemental insurance from an employer or an exchange plan that would cover additional non premium expenses that individuals incur while owning health insurance?

It is widely recognized that the Affordable Care Act (ACA) requires almost everyone to obtain health insurance and that more than 80% of working individuals are covered by an employer sponsored plan. Even with coverage, however, deductibles copayments and coinsurance continue to rise as employer try to control their own costs. According to a Kaiser Family Foundation study, the average annual deductible in 2013 was $1135. And, in 2014, a high deductible health plan will have an individual or family deductible of not less than $1,250 or $2,500 respectively. Next comes the out-of-pocket expenses: not to exceed $6,350 for individuals or $12,700 for families. That is before insurance will pay for what the plan dictates is covered and appropriate.

Enter fixed indemnity coverage also known as supplemental insurance. Although this type of coverage has been available for some time, it seemed as if the market for it would have declined as more people purchased health insurance. Indemnity coverage is separate and does not replace, but is obtainable in addition to health insurance. Typically, this would be an employer sponsored benefit that may be offered to complement a health insurance plan.

The idea behind this supplemental coverage is to help individuals manage health expenses before insurance or in addition to what insurance pays. The cost for this type of coverage depends upon an individual’s age and how much coverage is purchased. It would appear that such additional insurance could be instrumental in managing out-of-pocket expenses.

But not exactly. Fixed indemnity coverage is similar to catastrophic plans in that it most often doesn’t cover routine deductible or out-of-pocket expenses. It is the diagnosis of a critical illness or hospitalization for cancer or accidents that is covered, but not necessarily both. Fixed indemnity plans are very specific in what they cover and payments will be activated based on what  is not covered by another policy.

Expect to see a lot more about supplemental insurance in the months to come, most often at the workplace. It’s critical, however, that individuals evaluate supplemental policies with a keen eye toward their cost and the potential use of their benefit.

For additional information, contact EAB HealthWorks.