How Supplemental Health Insurance Works

HealthCare Writer

Updated on January 25th, 2021

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As the cost of health insurance and medical deductibles continue to rise, more and more people are looking for alternative ways to save money on their health insurance plans. Choosing the lowest cost health insurance plan can be risky because the lower the cost, the less amount of coverage you have. What if the unexpected happens and you are suddenly stuck with thousands of dollars in medical bills?

In a day and age of high-stakes health care responsibility, many Americans are purchasing “insurance for their insurance” to keep monthly prices low and their finances protected.

Overview of Supplemental Health Insurance

Supplemental health insurance is exactly that—a supplemental policy that helps individuals and families pay for specific medical instances an existing individual health insurance plan might not cover because they haven’t met their medical deductible for the year or don’t have the cash reserves to pay the bills. This “insurance for your insurance” supplemental health plan helps cover accidents or critical illnesses that can cost thousands of dollars. And since it’s a cash benefit, the money can be used for anything such as medical bills, the mortgage, car payments and even child care.

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Availability of plans and policy duration vary by state

Supplemental Health Insurance Helps Individuals and Families Alike

Supplemental health insurance works in one of two ways:

  • It helps individuals with high-deductible health insurance plans cover medical bills they would normally pay out-of-pocket because they haven’t yet met their health insurance deductible. (A “deductible” is the amount every policyholder must pay out-of-pocket before their health insurance company is responsible for shouldering a majority of the cost when in-network services are used.)
  • It provides additional cash assistance, even if a health insurance deductible has already been met and a claim has been filed and paid by the insurance carrier.

Anyone can enroll in a supplemental health insurance plan: individuals and families that have employer group health insurance, the self-employed, small-business owners and individuals with short-term health insurance or fixed-indemnity insurance coverage.

Like Medicare supplement, which was created to fill the gaps not covered by original Medicare, supplemental health insurance is the same concept—it covers the unexpected health care expenses not covered by individual health insurance plans.

State of American Health Insurance Finances

The monthly cost of health insurance has gone up substantially since 2015. A recent study by Blue Cross Blue Shield Association found that people who purchase their own health insurance from their state exchange or the federal marketplace pay 22% more than those who receive health insurance from their employer. This is due to health insurance companies struggling to profit from marketplace plans. The end result is passing the rising cost of health care on to individual policyholders who buy their own coverage. Many times these self-employed individuals are freelancers, small-business owners and the unemployed who are between jobs.

The Pew Charitable Trust looked at the state of American finances before President Obama’s last state of the union speech in January 2016, citing the insecurity of finances in the country. More than 8 out of 10 individuals are concerned about their savings. Seventy-one percent are afraid they won’t have enough to cover expenses should an unexpected bill arise, and 7 out of 10 people are concerned they won’t be able to retire. African-American households are the most vulnerable, with a majority saying they would have less than $5 leftover if they needed to eliminate their liquid savings due to an unexpected financial hardship like a large medical bill.

According to a report from the Federal Reserve, 46% of Americans could not afford a $400 emergency without putting the expense on a credit card or borrowing the money. To combat a potential financial crisis, Fed recommends individuals and families purchase insurance that covers the unexpected. While a majority of people surveyed said they had health and auto insurance, only 25% claimed to have disability insurance, which is considered a supplemental health insurance plan.

The Cost of Health Care Continues to Rise

The cost of health care rose 5.3% in 2014, which surpasses inflation. The reason this matters? As health care costs go up, so does your out-of-pocket exposure as health insurance plan deductibles rise. Out-of-pocket maximums, the most you have to pay for health care during the course of one year, vary from insurance plan to insurance plan. Fourteen percent of Americans with employer group coverage have just a $2,000 out-of-pocket maximum on average while those who purchase individual health insurance plans on the marketplace exchange have an overall maximum of $7,150 in 2017, $14,300 for families.

For those with a high risk of having out-of-pocket healthcare expenses, supplemental health insurance makes a strong case of good financial sense.

Types of Supplemental Health Insurance Plans

Accident Insurance

An average of 1.35 million children suffer a serious sports injury every year. Of those, more than 450,000 are from a strain or sprain. Unintentional accidents in the home force more than 21 million people to seek medical attention each year.

Critical Illness Insurance

Serious illness is a burden worldwide. In the U.S., an estimated 1.7 million people will be diagnosed with cancer in 2016. Approximately 735,000 people have a heart attack in the U.S. every year. More than 795,000 Americans have a stroke each year. The effects of a massive critical illness are a strain on emotions and finances. Critical illness insurance covers serious diagnoses such as heart attack, stroke, cancer and major organ failure, depending on the rules and definitions of the insurance policy. Payments can be made in a cash lump-sum to the patient or directly to the health insurance company to pay medical bills.

Critical illness insurance typically has certain pre-existing limitations, and it’s important to review the details of any plan before purchasing. If you have questions, look online or call the insurance company’s customer service line to find out more.

Cancer Insurance

Approximately 40% of both men and women will be diagnosed with cancer at some point during their lives. The most common types of cancer are bladder, breast, colon, endometrial, kidney, lung, pancreatic, prostate and thyroid cancer, in addition to leukemia, melanoma and non-Hodgkin lymphoma. Cancer insurance coverage varies by insurance company, so check any plan details before purchasing a specific cancer policy.

Bundled Supplemental Health Insurance Plans

Supplemental health insurance plans on Pivot Health have several types of insurance products bundled together into one policy. This helps take the guesswork out of choosing which supplemental gap insurance plan to choose. Pivot Health plans include accident insurance, critical illness, a daily hospital benefit, accidental death insurance and disability insurance from a covered accident.

Pivot Health Supplemental Health Insurance Plan Specifics

Unlike many supplemental health insurance plans that only offer coverage for one specific ailment, Pivot Health offers bundled accident, critical illness and hospital indemnity benefits with each policy, plus benefits for everyday medical expenses not covered by individual health insurance. Here is an overview of Pivot Health’s Latitude supplemental benefits package:

Supplemental Health Insurance Benefits

  • Accident medical insurance: A set dollar amount of benefits if injured in a covered accident, like an accident at home or a child’s sports injury.
  • Critical illness insurance: A set dollar amount of benefits if diagnosed with a covered critical illness, like a heart attack or stroke.
  • Hospital indemnity insurance: A set dollar amount of daily benefits for hospitalization, up to a certain number of days, for inpatient care.
  • Accidental death and dismemberment: A set dollar amount for beneficiaries of covered person who perishes in a covered accident.

Membership Benefits

In addition to supplemental health insurance benefits, Pivot Health plans include extra non-insurance benefits for everyday health care that include:

Free and unlimited doctor consultations
Getting sick is never convenient, and for individuals with high-deductible health insurance plans that do not include office visit copays, it can cost more than $1,000 a year for a family of four to visit the doctor for colds, flu, dermatology concerns and more. Pivot Health offers members access to board-certified doctors located in the United States, over the phone or through video chat 24 hours a day, 7 days a week, at no additional cost.

Discount prescription drugs
Savings can range up to 75% off for generic drugs at over 66,000 pharmacies nationwide with a Pivot Health discount prescription drug card, or consumers can download coupons right to their smartphone for instant digital discounts.

Savings on eye exams and eyewear
Discounts can save members 15%–40% for the entire family on eye exams and eyewear plus contact lenses.

Supplemental Health Insurance Complements Existing Individual Health Insurance Plans

As a lump-sum cash benefit, supplemental health insurance allows consumers the ability to keep the doctors they have and get the care they need without worrying about in-network providers. Plus, with Pivot Health supplemental plans, individuals and families can enjoy extra savings on doctor consultations, prescriptions and eye care starting at $1 per day. For more information about Pivot Health supplemental plans, call 866-566-2707 to speak with a representative (Calls are accepted Monday – Friday, 8:30 a.m. – 4:30 p.m. Central Time).

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