Even good health insurance can leave you with a large deductible, coinsurance and bills that have nothing to do with medical care, like rent while you're out of work. Supplemental health insurance is designed to help with those costs.
How supplemental plans differ from major medical
Your main health plan pays doctors and hospitals for covered care. Supplemental plans usually pay you directly, a fixed amount when a specific event happens, regardless of what the care cost. The NAIC's consumer guide to health insurance (written by state insurance regulators) describes these as covering a more limited set of services; hospital indemnity, for example, pays a fixed amount for each day you're in the hospital.
| Major medical plan | Supplemental plan | |
|---|---|---|
| Who gets paid | Your providers | Usually you |
| What triggers payment | Covered medical care | A specific event listed in the policy |
| How much it pays | Based on the bill and your cost-sharing | A fixed, pre-set amount |
| Out-of-pocket maximum | Yes, for ACA-compliant plans | No |
Common types
Hospital indemnity
Pays a set amount for each day or each admission when you're hospitalized. Useful for plans with high inpatient costs.
Accident insurance
Pays fixed amounts for injuries from accidents, such as a broken bone, an ER visit or a concussion. Popular with families with active kids.
Critical illness
Pays a lump sum if you're diagnosed with a covered condition, such as cancer, heart attack or stroke. The money can help with lost income, travel to treatment or household bills.
Dental and vision
Dental coverage isn't an essential health benefit for adults, so many adult health plans don't include it (HealthCare.gov: dental coverage); vision is often separate too. Separate plans cover cleanings, fillings, eye exams and glasses or contacts, usually with yearly maximums.
Questions to ask before buying
- What exactly triggers a payment, and how much is it?
- Is there a waiting period or a pre-existing condition exclusion?
- How does the yearly premium compare with what the plan would realistically pay you?
- Could I build the same cushion in an HSA or savings account instead?
Supplemental coverage is often offered through employers, sometimes at group rates. Read the outline of coverage carefully, and remember these plans work alongside your main plan, not instead of it.
Start with the fundamentals in how health insurance works, especially the out-of-pocket maximum, which supplemental plans don't have.
