Good News in Alternative Supplemental Plans

Nearly a year and a half after the passage of health care reform, rising medical costs continue to beleaguer individuals and small businesses looking to purchase health insurance for their families and employees. Those who can afford the higher premiums associated with major medical plans often are faced with high deductibles or other out-of-pocket costs.

The good news is that there are new alternatives on the market that can help consumers find the health care coverage they want at a price they can afford. For many individuals and small businesses, supplemental products are a good option to help bridge the gaps in traditional health plans and create more extensive protection.

When selecting a supplemental plan, it is important to understand the differences between fixed-benefit and reimbursement plans, the two main ways in which a plan can pay benefits.

Fixed-Benefit Plans

Fixed-benefit plans pay a set cash amount when a customer receives a service like a medical test or treatment. Customers can choose to receive payment directly, so they can determine how best to spend it. For example, with a fixed-benefit accident plan, benefits can be used:

• To help pay medical bills related to the accident;
• To help cover expenses indirectly related to care such as travel and lodging expenses;
• To supplement lost income and pay for daily living expenses.

Fixed-benefit plans are sometimes known as scheduled-benefit plans, since a schedule of benefits specifies in advance how much money will be paid for a given service—so the customer knows up front exactly what benefits to expect. As an added advantage, fixed-benefit plans are generally not subject to deductibles, coinsurance or coordination of benefits with any other insurance products.

Medical Expense Reimbursement Plans

Reimbursement plans, on the other hand, pay benefits according to the amount charged for the service. These plans, which typically are sold with a primary health plan, offer the advantage of limiting the customer’s out of pocket exposure when a unique event happens like an accident. Generally, after a small deductible is met on the supplemental plan, it will reimburse for the entire amount charged for services, up to the per-event limit, which is usually set at the amount of the insured’s deductible or out-of-pocket maximum.  

Agent Advantages

In addition to providing substantial benefits for the consumer, supplemental plans offer several advantages to agents selling the plans. There are a wide variety of supplemental plans on the market today, ranging from accident and critical illness, to more specialized types of plans including dental, cancer and hospital indemnity. With so many products to choose from, agents easily can find a plan to fit every client need and budget. Since many supplemental plans are designed to complement a primary health plan, insurance companies are making it easier than ever to attach a supplemental plan to the customer’s primary policy—often with just a few clicks and no additional underwriting.

Agents should also note that supplemental plans historically have offered higher commission rates when compared with traditional health plans. As many agents are seeing their commissions reduced on major medical products, supplemental plans offer a way to satisfy their clients’ need for affordable coverage while earning the compensation that will allow them to continue to succeed in this space.

Access to Health Care

As medical inflation and rising premiums are placing major medical insurance out of reach for many individuals, the industry is responding by offering broader and more customized benefits as fixed-benefit medical plans. These type of plans offer affordable monthly premiums and access to everyday health care services like doctor office visits, prescriptions and hospital stays. Like other fixed-benefit products, the plans pay a set cash amount when a customer receives a service, and there are no deductibles or copays, so benefits start right away.

Increasingly, carriers are offering a wider range of fixed-benefit medical plans with an array of benefits and features, so it pays to do a bit of research before selecting a plan. One thing to look for is how the plan provides wellness and preventive benefits. Some plans separate them out and pay lower benefits, whereas other plans treat them as part of the overall benefit package. Another important consideration is whether the plan provides meaningful benefits for inpatient hospitalization as well as inpatient and outpatient surgery. Finally, it’s good idea to find out what other features and services are available. For example, some plans offer access to valuable network discounts on medical services and prescriptions. A few plans even offer access to advocates who will help negotiate any outstanding medical bills, which helps give customers the peace of mind they need before purchasing a plan.

With so many health insurance options available, consumers are looking to their agents for expert advice in selecting a plan. The key to choosing the right plan is understanding customers’ unique needs, which benefits and features they value most, and then helping them to understand how they can use those features and other services to help them maximize value from their plan.

About The Author

Scott Krienke

Senior Vice President, Product and Marketing

Mr. Krienke oversees Assurant Health’s product and marketing functions, guiding the development and growth of the company’s product lines. Mr. Krienke joined the company in 1984 and has previously served as Vice President—Human Resources as well as Vice President—Claims and Customer Service. Mr. Krienke holds a degree in business administration from Marquette University and holds the FLMI and ALHC designations. Mr. Krienke is on the Board of Pathfinders.