It's time to enroll in benefits at work. You've selected your major medical, dental and vision plans. That's all you need, right?
Maybe, maybe not.
If your employer offers supplemental health insurance—like accident or critical illness coverage—taking just a few minutes to understand these plans can be invaluable when planning for your financial future.
What is supplemental health insurance?
Supplemental health insurance is designed to provide additional financial benefits that can help cover expenses associated with injuries, illnesses and hospital stays that may or may not be covered by traditional major medical or other health insurance.
Plans may also be called voluntary benefits, accident insurance, cancer policies, critical illness insurance, specified disease insurance or hospital indemnity insurance.
The name fits. These plans are meant to supplement your primary health insurance to help reduce the financial impact of out-of-pocket costs that can add up quickly.
How they work
You experience a covered illness, injury or medical service after your plan's effective date.
You file a claim with the insurance carrier, which can usually be done online or over the phone.
If the claim is approved, you'll typically get paid directly, even if your major medical plan already picked up some or all of the bill.
Types of supplemental health plans you may see:
Critical illness insurance
Critical illness insurance typically provides a lump-sum benefit when you're diagnosed with an illness that's covered under the plan. Standard conditions usually include cancer, heart attack, stroke and major organ failure. Some carriers only cover cancer diagnoses, while others cover hundreds of conditions, including pneumonia, sudden cardiac arrest, diabetes and more.
Hospital indemnity insurance
Hospital indemnity insurance typically pays a fixed dollar amount per day for services and supplies you receive during a hospital stay, up to a maximum number of days each year. Stays in intensive care units (ICUs) and facilities that support mental health or substance abuse recovery may also be covered. Some plans even cover hospitalization from childbirth, which is one of the most common reasons for a hospital stay.
These plans typically pay preset benefit amounts for injuries and medical services related to an accident. And while it's different from auto insurance, some carriers will cover accidental injuries resulting from a car crash, in addition to other typical injuries from playing sports, falls or other common accidents. Eligible injuries usually include fractures, dislocations, and torn ligaments, and covered medical services may include X-rays, physical therapy, surgeries and more.
With any of these coverages, be sure to read the enrollment materials to ensure you know what's covered and what benefits you can expect.
Why do I need supplemental health insurance?
Supplemental health insurance can help close gaps between what your major medical insurance pays and what you have to pay out of pocket. You also have more flexibility with how you use your benefits. While your major medical insurance may only pay the provider directly, supplemental health insurance can pay you directly, so you can use the money for anything you need.
Who's eligible for supplemental health insurance?
Some employers may require you to work a certain number of hours every week in order to sign up. Ask your benefits representative if you're eligible to enroll and if spouse and/or dependent coverage is available.
Is supplemental health insurance expensive?
Supplemental health insurance plans are meant to be affordable add-ons to your other coverages. Plan premiums, which is the amount you'll pay to be covered by the insurance plan, vary by product and provider. Some employers will contribute to some or all of the premiums to reduce the cost.
How can I enroll in supplemental health insurance?
If offered by your employer, you can enroll in supplemental health insurance while onboarding or during annual open enrollment.
Do I need to reelect my supplemental health insurance benefits every year?
This will be determined by your employer. We recommend reaching out to your benefits representative ahead of enrollment to see if you need to make any annual updates.
Are my supplemental health benefits taxable?
Any benefits totaling more than the costs incurred for medical care are generally taxable if the employee or employer paid the premium on a pretax basis. It's also important to note that benefits may affect eligibility for public assistance like federal, state or local welfare programs. Reach out to a tax professional and/or your benefits representative for specific information.
Are my supplemental health benefits HSA-compatible?
Some plans are designed to be compatible with health savings accounts (HSAs). Please consult with a tax professional and/or your benefits representative to determine which supplemental benefits may be used with an HSA.
Do I have to use my supplemental health insurance benefits on medical expenses?
Not usually. You can choose to have benefits paid directly to your medical providers, or the carrier can pay benefits directly to you so you can use them on anything you need.
Can I keep my current supplemental health insurance benefits if I leave my current employer?
You may be able to keep your coverage if your group's plan includes an extension or continuation provision, as long as the employer's group plan remains in force, and as long as premiums are paid. You may also have the option to move your coverage to another group plan or convert it to an individual insurance plan. Contact your benefits representative to see what's available for your plans.