Supplemental health insurance couldn't have a more descriptive, yet confusing name if it tried.
It feels like you should know what this type of insurance does or is suppose to do, but at the same time hearing the word supplement or extra when dealing with your primary health insurance makes you want to lock yourself in a padded room somewhere.
Let's start with the basics. There are a few different types of supplemental health insurance. The first big distinction you will want/need to make is if it's for your major medical health insurance or your 65+ Medicare coverage.
It's very common, almost expected, for you to have a Medicare supplement in addition to your government provided Medicare parts A and B.
It is however much more uncommon for you to have supplemental coverage for your regular old health insurance.
That is until now.
We're going to spend the rest of this article taking a look at what supplemental health insurance does for your existing (under 65) plans and why in a post Obamacare world they might start to make a little more sense.
What Does Supplemental Health Insurance Cover?
The goal of each type of supplemental health insurance is to plug holes where an unexpected, unbudgeted amount of money could come out of your pocket.
The two most common types of supplemental policies you will find are accident and critical illness or sometimes referred to as cancer, heart attack, stroke.
It's important to note that these policies on their own are not considered creditable coverage and do not meet the requirements of the law (ACA/Obamacare).
How Does Supplemental Accident Insurance Work?
Again, there are usually two type of supplemental accident policies you can buy a lump sum policy or a fixed benefit.
Lump Sum - These policies usually pay a set dollar amount for any accident covered under the policy. It's common to see amounts ranging from $2,500 - $10,000.
Fixed benefit - These plans get a little more specific and hand out cash based on the type of the different types of treatment you received as a result of the accident.
How Does Critical Illness Insurance Work?
Much like a lump sum accident plan, a critical illness policy will pay you a set dollar amount if you are diagnosed with one of the outlined “critical” illnesses.
Generally you can select coverage amounts for $10,000, $20,000, $30,000, $40,000 or $50,000. Meaning if you unfortunately develop one of those serious conditions the policy will pay you that amount of money to help cover expenses associated with the treatment.
Here is an example list of the type of illnesses you would expected to be covered on the policy.
- Heart Attack
- Life-Threatening Cancer (diagnosed more than 90 days after effective date)
- Loss of Hearing
- Loss of Speech
- Loss of Vision
- Major Transplant
- Paralysis: Quadriplegia
- Paralysis: Paraplegia
- Paralysis: Hemiplegia
- Renal Failure
Individual and Family Supplement Health Plans
You can buy these policies for just yourself or your entire family. Of course the more people you add to the plan, the more expensive it will be.
Accident plans might make a little more sense if you have young active children and a critical illness policy might be better suited for you and/or your spouse.
You can mix and match these supplemental policies to fit your needs.
How Much Do Supplement Policies Cost?
This question is going to entirely dependent on your age, how many people you want to cover and the amount of coverage you need/want.
But, an accident policy for my family, my wife and I are both 31 years old and have two young children could cost anywhere around $50-$100 a month.
If I took my family off and just ran it for a 31 year old single male it could be as low as $14-$30 a month.
A critical illness policy on the other hand would cost anywhere from $9 - $44 a month. For my wife and I it would be $17 - $85 a month
Note: Most companies only allow you to buy critical illness policies for adults.
Of course, it's fairly easy to figure out how much these policies will cost for you and your family. We can take a look at that next.
When Does Supplement Health Insurance Make the Most Sense?
These type of policies have been around a long time. It was always hard to recommend them because to cost of your health insurance was pretty steep.
However, since Obamacare started back in 2014 it's possible, if you qualify for subsidies, the federal government is paying a good portion of your health insurance bill.
In addition to that, you might have also taken on a much higher deductible than you would've liked as a result of the increased costs.
That's where an extra $10 - $20 a month can go a long way in closing the gap of that high deductible and protect you from paying several thousands of dollars unexpectedly out of your own pocket.
The Bottom Line
Supplemental health insurance isn't always going to make sense, but there's a much better chance of these types of policies filling a need you might have as a result of the current health insurance landscape.
Don't rule anything out and make sure you take a few extra minutes to do the math and see if these policies will provided favorable financial protection from big ticket medical expenses.
Let's get a little more specific with what these plans cover and DON'T cover and how much they will cost you.