Supplemental Health Coverage Makes Employees More Responsible

Once considered a side dish, voluntary benefits are now making their way to the main course — especially supplemental health care coverages such as hospital indemnity insurance, gap insurance, accident insurance and critical illness insurance.

In the most recent Mercer National Survey of Employer-Sponsored Health Plans, which surveyed large employers with more than 500 employees, 59 percent of respondents reported that they offer an accident plan. Almost half (45 percent) offer critical illness plans, and 21 percent offer hospital indemnity insurance. It did not measure gap insurance.

The rise of health care costs contributed to this growing interest, as these health plans are designed to ease the financial burden of events such as accidents, hospital visits and diagnoses. Fifty-five percent of the survey respondents cited improving the financial health of employees as motivation to offer these supplemental plans.

Gap insurance, recently covered in the Wall Street Journal, is the most rigid type of supplemental health coverage and specifically covers the increase in hospital out-of-pocket costs that comes with the rise of health care expenses. The money is paid directly to the provider rather than directly to the employee, and doesn’t allow for flexible spending.

The other three types of insurance measured in the Mercer survey cover a fixed amount based on the occurrence of an incident, and the employee receives a check from the insurance company that they can use for any related cost.

Accident insurance pays a fixed amount based on an accident happening. If someone breaks their arm, they could use the check for a hospital co-pay or a sling, among other things. A critical illness plan comes into play when, for example, someone is diagnosed with cancer. They could use the money for hospital costs or for any transportation/lodging costs they picked up while traveling to a specialist in another city.

Finally, a hospital indemnity plan pays a fixed amount based on what a person’s hospital stay looks like. They might get, for example, $1,000 for the admission plus a per-day amount.

“Hospital indemnity insurance provides a multiple-dimensional approach to the medical insurance,” said Ginny Palmieri, vice president of specialty services at Independence Blue Cross. It provides an employee with financial stability and flexibility. Palmieri said that within the industry, hospital indemnity was the fifth best-selling insurance of 2014, and interest has grown since.
As HR managers continue to see the health care landscape changing and the larger shift to high deductible plans, Palmieri said HR managers should make sure that they’re providing different ways to make sure the employee has stability with their coverage.

These insurance types fit into the wider category of voluntary benefits. Five years ago, these weren’t widely considered part of a comprehensive benefits program, but today they are offered along with core benefits packages, said Tim Weber, who heads the voluntary benefits practice at Mercer.

“Employers are looking toward them as a strategic part of total benefit offering,” he said.

When employers are asking benefits counselors about their options during open enrollment, Weber said, it accomplishes a couple things. It helps the employer offer employees coverage that addresses risks, and it also results in the employee being more engaged in the risks they face.

“[Employees] are now moving down the path of being more engaged in the management of their health,” said Weber.

Andie Burjek is a Workforce associate editor. Comment below, or email at aburjek@humancapitalmedia.com. Follow Workforce on Twitter at @workforcenews.