How Group ‘Gap’ Insurance Can Save Your Staff From Financial Hardship

If you are offering high-deductible health plans to your staff to reduce overall premium outlays, you know that this type of insurance has one major drawback: higher out-of-pocket expenses that some may struggle to afford if they experience a sudden illness or accident.

Fortunately, you can offer a product that can help them cope with unexpected out-of-pocket costs for their health care: gap insurance, otherwise known as supplemental medical expense coverage. Supplemental insurance is an extra layer of coverage designed to help with expenses primary health insurance may not fully cover, including copays, coinsurance, deductibles and even living expenses.

With more Americans going into serious debt due to medical expenses, supplemental insurance can provide a financial lifeline when someone needs it most.

Group supplemental insurance is a voluntary benefit that is usually less expensive than if someone purchases it on their own. There is typically no underwriting or health exams for group policies, which is not always the case with individual policies.

This voluntary benefit can be structured in different ways, but they usually cover deductibles, copays, coinsurance costs, prescription drug costs and other health care-related expenses.

Gap insurance may also cover nonmedical expenses, including living expenses during a hospital stay or while recovering at home from an illness or accident. Other gap plans might include income replacement for periods when individuals can’t work due to an illness, accident or after a medical procedure.

Types of gap insurance

There are a few types of gap insurance, each covering something a bit different:

Hospital indemnity insurance — This can help cover the costs associated with a hospital stay, including the cost of childcare or if a patient needs to travel far from home to receive medical care. Depending on the plan, hospital indemnity insurance gives you cash payments to help pay for added expenses that may come while you recover. Typically, plans pay based on the number of days of hospitalization.

Critical illness insurance — This provides a benefit if a policyholder becomes very ill or suffers a serious medical problem, like a heart attack or stroke. This plan supplements existing health insurance coverage with extra funds when a policyholder incurs extra expenses due to an illness and when they can’t work. They may receive a lump sum to cover these added expenses or monthly payments depending on the plan.

Accident insurance — This can help the policyholder cover medical costs or living expenses if the policyholder is injured in an accident. Policies pay out a preset number of times over a specific time or in a lump sum.

Cancer insurance — This can cover radiation, chemotherapy, immunotherapy, surgery, hospitalization and possibly screening benefits — all related to a cancer diagnosis and treatment. It can pay out in different ways:

• Expense incurred policy, which pays a specific percentage of treatment costs up to a set limit.
• Indemnity policy, which covers expenses for approved treatments up to a predefined limit.
• Lump-sum policy, which pays a fixed amount after a cancer diagnosis.

Benefit to employees

The cost of gap coverage is reasonable, ranging from $10 to $50 a month depending on the coverage. Employers can offer to pay all or part of the premium.

If you offer HDHPs to your staff, supplemental insurance can help your employees weather a serious illness or accident by providing much-needed funds to help them get buy during a difficult period.