Mind The (Medical Coverage) Gap

February 22, 2017

To help employees cope with rising out-of-pocket medical expenses, a growing number of employers are offering employees gap insurance. Gap insurance is supplemental insurance that covers the difference between what a core medical insurance plan pays for services and the contribution a policyholder is expected to make. Common examples of gap insurance include coverage for hospital stays, accidents, and critical care for major illnesses.

Unlike core medical plans, employers tend to offer gap insurance as voluntary insurance, meaning that employees pay for it themselves, although often at a discount negotiated by their employer.

Another difference is that gap insurance is not constrained by the rules covering core medical coverage. This means, for example, that individuals with pre-existing conditions can be excluded from coverage. However, in a recent article in the Wall Street Journal on the growing popularity of gap insurance, Amy Hollis, a senior consultant for Willis Towers Watson who leads the voluntary benefits practice for the company, pointed out that many providers will remove this provision for an employer.

As an alternative to gap insurance, Hollis also said that some employees might be better off putting money into a tax-advantaged health savings account and using those funds to pay out-of-pocket expenses. But for employees with a low tolerance for risk or who have access to plans that are relatively inexpensive, gap coverage could make sense.

To read the entire article in the Wall Street Journal, click here.

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