Supplemental Health Insurance: What It Is and Why It Exists

Supplemental Health Insurance: What It Is and Why It Exists

Has your employer started offering supplemental health insurance for 2022? If so, do you know what it is and why it exists? Supplemental health insurance is not a new phenomenon. But as America’s employees have begun expecting more out of their benefits packages, companies are looking at supplemental health insurance as a means of boosting benefits without spending a lot of money.

Supplemental health insurance also isn’t limited to employer-sponsored plans. Just ask anyone already enrolled in Medicare. Even people who purchase health insurance on the individual market take advantage of supplemental plans from time to time. Whether or not they should exist is a matter of debate. The fact that they do exist is not.

What Supplemental Health Insurance Is

The simplest definition of supplemental health insurance comes from the NIH’s National Cancer Institute. The Institute defines supplemental health insurance as “an additional insurance plan that helps pay for healthcare costs that are not covered by a person’s regular health insurance plan.” That is pretty straightforward.

You may have a basic health plan through your employer. That plan offers coverage for a limited number of things. If you need tests, treatments, or procedures that are not covered by your basic plan, you either purchase supplemental insurance or pay out-of-pocket. Supplemental insurance would cover those additional expenses up to a predefined limit.

Supplemental insurance comes in many forms, including:

  • long-term illness coverage
  • catastrophic illness coverage
  • private disability insurance.

You can even buy supplemental policies that are specific to one or two conditions. A supplemental policy covering cancer treatments is a good example. You could not use it for anything else. But if you got cancer, it would kick in once you reached the limits of your basic health insurance plan.

Supplemental Plans Through Your Employer

Supplemental health insurance used to be unheard of in the workplace. Employers offered standard health insurance policies along with retirement plans and, if they were especially generous, dental and vision. But things are changing. According to Dallas-based BenefitMall, a general agency representing more than a hundred carriers nationwide, supplemental plans are more popular than they have ever been.

The thousands of brokers who rely on BenefitMall for general agency services can offer their clients any number of supplemental plans offered by carriers under the BenefitMall umbrella. They are doing so more frequently as a way to enhance their benefits packages.

Supplemental Insurance under Medicare

Perhaps you are approaching retirement age and looking forward to Medicare. Do yourself a favor and research Medicare’s four parts. Medicare is the government insurance plan that covers people aged sixty-five and older.

Medicare has four parts:

  • Part A – Major medical that covers things like hospital stays.
  • Part B – Standard medical coverage that covers office visits, routine tests, etc.
  • Part C – Known as Medicare Advantage, Part C expands the scope of Parts A and B.
  • Part D – Provides coverage for prescriptions.

The point of bringing this up is to say that only Parts A and B are standard for all Medicare patients. Parts C and D are considered supplemental insurance that Medicare participants pay for themselves. Without these two supplemental policies, patients are left to pay for uncovered services out-of-pocket at the time these are rendered.

Supplemental health insurance exists because base health plans do not cover everything. And what they do cover is generally not covered at 100%. A supplemental plan adds extra coverage to make up for basic plans shortfalls. Is it worth it? Each individual consumer has to decide that for themself. It may or may not be worth it to you.

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