What is Hospital Confinement Indemnity (a.k.a. Medical Gap) Insurance and how is it beneficial for your employees?

Mind the Gap

Health insurance costs are rising, and like you, your employees are looking for help to cover these increasing costs. As an employer, you are faced with the dilemma of containing rising health care costs while continuing to offer affordable benefits to your employees.

Many employers are choosing to offer higher deductible plans with lower premiums as a means to lower benefits costs. However, this option poses an additional financial burden on their employees because these plans increase out-of-pocket costs, which many employees cannot afford.

A 2014 study by The Commonwealth Fund found:

  • More than 1 in 5 adults age 19-64 spent 5% or more of their income on out-of-pocket costs, and 13% spent 10% or more of their income 1
  • 3 in 5 low-income adults and 50% of those with moderate incomes said their deductibles were difficult to afford 1
  • 2 in 5 adults with private insurance who had high-deductible plans said they delayed needed care because of their deductible 1

The good news is that Medical Gap insurance can be an effective solution for employers to lower their group health insurance costs without compromising benefits.

What is Medical Gap insurance and how does it work?

Hospital Confinement Indemnity (also known as Medical Gap insurance) lessens the financial burden of unexpected medical care 1 by helping employees cover out-of-pocket expenses. 2 Gap insurance is not major medical insurance and is not ACA-compliant, but it does work with your employee’s current health insurance plan. 1

Gap insurance provides a lump-sum benefit directly to the employee, or can be assigned to a provider, for a covered hospital confinement or covered out-patient surgery and helps to offset the Gaps caused by costs that aren’t covered by major medical plans. 3

The below table shows an example of how Gap insurance can help minimize out-of-pocket costs.

Inpatient / Outpatient With Gap Coverage Without Gap Coverage
Deductible $4,000 $4,000
Coinsurance $1,000 $1,000
Total Out-of-Pocket $5,000 $5,000
Selected Gap Benefit $4,000 $0
Net Out-of-Pocket $1,000 $5,000

What are the benefits of Medical Gap insurance?

  • Can be 100% employee paid, 100% employer paid, or contributory
  • The participation requirement is typically as low as 2-5 enrolled employees 2, 4
  • No health questions or exams are required unless the benefit is over a certain amount
  • Some carriers do not include exclusions for pre-existing conditions, while other carriers do. Some carriers will waive the pre-existing conditions exclusion if the plan is 100% employer paid.
  • Flexible plan design 4 – usually designed to complement the deductible and out-of-pocket maximum of the group medical plan
  • Some plans will cover diagnostic tests such as MRIs

Benefits can be paid directly to the employee 2 – employees can receive payment even if they didn’t incur any out-of-pocket costs! 4 Employees can use the payment for any purpose, from covering medical expenses (such as copays, deductibles, and prescriptions) to everyday expenses (such as mortgage, utilities, fuel, or groceries). 1

Wondering if a Medical Gap insurance plan is right for your company?

Call us at (972) 673-0045 to speak with one of our knowledgeable Group Benefits Team Members and learn more.

1 Is medical Gap insurance worth it?
2 Gap Insurance: Help for the in-between time
3 Benefits of hospital confinement indemnity insurance
4 Ease the financial impact of hospital admissions for employees

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