Gap Insurance: A Security Blanket for Those With High-Deductible Policies
David Carter |
December 13, 2013
Gap Insurance: A Security Blanket for Those With
High-Deductible Policies
As costs associated with providing health insurance have
risen steadily over the past decade, many companies have sought to protect
themselves financially by switching to cheaper, high-deductible plans.
For example, the number of large companies offering high
cost-sharing plans rose to 23 percent in 2013, from 4 percent in 2005,
according to the Kaiser Family Foundation. The trend is expected to continue to
intensify due to concerns that insurance costs will spike under Obamacare.
In making the move toward higher-deductible plans, companies
shift costs to employees, which can be unpopular and hurt retention and hiring.
To make high-deductible plans more palatable to workers, companies should
consider turning to gap insurance, sometimes known as bridge insurance, as a
supplementary product. Gap insurance is typically sold as a voluntary benefit,
with employees paying the full cost. Employers, however, can choose to pay the
cost of gap coverage.
Gap plans are designed to help shield employees from the large
medical bills they can incur under high-deductible policies. They pay fixed-dollar
benefits for hospital stays, outpatient surgeries and complex diagnostic
procedures.
A typical gap plan is written for $3,500 or $5,000. As
industry research shows, 86 percent of health care claims total less than
$5,000 per year and thus could be handled with gap plans, according to Benefits Pro (http://www.benefitspro.com/2013/08/27/ppaca-fueling-gap-insurance-sales).
“Now (gap plans) make sense for a lot more people,”
Christopher Watts, a partner with Mercer benefits consultants told The Denver Post
(http://www.delcotimes.com/lifestyle/20131210/what-you-should-know-about-high-deductible-insurance-before-you-get-sick). “We’re seeing a high level of
interest.”
Most of the interest in gap insurance comes from small- to
medium-sized businesses that want to provide coverage for 10 to 250 employees
plus their dependents, HR consultant Jeff Allen told Benefits Pro.
Steve Goulet, principal and senior vice president for
Houston-based human capital consulting firm, Ascende, said that gap insurance
doesn’t pencil out for larger companies.
“What I’m hearing as I travel across
the country is that (the Patient Protection and Affordable Care Act) is going
to demand that people do something different, whether it’s dropping their
coverage altogether or looking for a different plan,” said Stephen Parrish,
marketing director for Crescent Medical Bridge, a program manager for several
carriers that offers gap insurance. “I believe they will discover gap insurance
if they haven’t already and determine we’re a good alternative.”
At the very least, small- and mid-size
companies should consider adding gap insurance to their voluntary benefits
offerings. In our next post, we’ll take a broader look at voluntary benefits
employers should consider.