As premiums and deductibles continue to rise and coverage gaps grow in size, the challenge for both employers and brokers alike is finding a way to mediate these mounting cost issues.
The answer may lie in the strategy.
Reactive vs. Proactive
More often than not, gap plans are an after-thought. They are added into a health benefits structure only after a gap has already affected employees and a complaint made. This reactive approach is too slow.
Once a primary health plan change is made (whether that be an increase in deductible, change in formulary or switch to another health plan), this strategy banks on a “Well, let’s just see what happens” sentiment. But what often happens is an untimely, costly coverage gap that, depending on the expense, can be detrimental to someone’s health and/or financial wellbeing.
A proactive approach, on the other hand, takes a comprehensive look at the change and foresees the likely impact that it will have on coverage. Then, at the same time, a gap plan is implemented to avoid the potential issues.
This strategy has also been called benefits bundling: grouping the primary plan together with supplemental gap plans to add additional coverage at the onset of plan implementation. Discussing these plans at the same time as the primary plan gives employers the ability to make more informed and thoughtful decisions on their benefits offerings.
Here’s an example: A company is unhappy with the high premium cost of their current primary health plan. They are looking to switch to a high deductible health plan (HDHP) to transfer some of the cost to employees. However, they foresee that the growth in out-of-pocket expenses due to the HDHP will upset employees, so they turn to their broker for suggestions. The broker comes back with several supplemental gap options that will offset some of those out-of-pocket costs by adding additional coverage. The company chooses a supplemental medical reimbursement plan. When enrollment rolls around, the company presents the primary plan change with the additional supplemental plan to lessen the impact for employees and shrink any coverage gaps.
A point of confusion that can limit this strategy is not knowing the full extent of gap plan options.
When many people think of gap plans, they immediately turn to voluntary plans, but gap plans aren’t just hospital indemnity or cancer policies. Some gap plans offer coverage for deductibles, coinsurance and the everyday out-of-pocket expenses. This is the kind of applicable coverage employers, employees and brokers are looking for!
Voluntary plans can be great options to offer employees to opt into, especially for those who can predict their health expenses in the coming year (for example, pregnant mothers or cancer patients), but these plans don’t offer coverage outside of their specified illness or event. Most coverage gaps typically fall within the deductible and coinsurance and often won’t be covered by voluntary plans.
Another category of gap insurance that will cover for those kinds of expenses is supplemental expense reimbursed insured plans. These plans reimburse for some or all of employees out-of-pocket expenses, and therefore greatly reduce or eliminate coverage gaps.
Leaving this type of plan out of your strategy greatly reduces your ability to close coverage gaps.