As employers shift health coverage, consider gap insurance

Don't laugh, but I prefer watching classic shows from over a half century ago over most of what I see on network TV today. "The Andy Griffith Show" (or as my kids describe it, the "Barney" show) is a particular favorite in our home and is watched nearly every evening after dinner.

Since my demographic is probably not the target for these shows the commercials are usually focused on things of interest to a more seasoned audience. At this time of year, it seems like virtually every commercial is focused on Medicare open enrollment and the importance of having supplemental coverage to pay for what Medicare wont.

While supplemental health-care coverage is vital to our senior population, what gets far less attention is how useful similar plans can also be for families that don't have tens of thousands of dollars saved up for a potential medical emergency. While the most recognizable provider of these types of supplemental or gap, plans is probably Aflac, there are many providers you can work with.

These different policies can vary in both their cost and what they cover. For example, accident insurance covers expenses that come about as a result of accidental injury. It can be something like falling off a ladder while hanging up the Christmas lights, cutting yourself while chopping vegetables for a family gathering, or stepping on a glass ornament while putting up the tree.

Another popular type is called hospitalization coverage and, as its name implies, only kicks in if you become hospitalized from one of these accidents listed above or any other event requiring a trip to the hospital. A third popular type is called critical illness coverage, and it helps supplement the out-of-pocket costs you will encounter if diagnosed with specific critical illnesses such as cancer, heart disease or stroke.

You may be asking yourself. if my employer already provides health insurance, why should I bother spending my hard-earned dollars supplementing it with more? The answer is because in recent years most employers have gone to high-deductible plans that only start paying bills once a deductible of many thousands of dollars has been met. And even then, the insurance company only pays a portion of the costs until the individuals maximum out-of=pocket cost has been paid.

According to the Keiser Family Foundation, in 2020 the average family deductible for these types of plans was just under $5,000. For plans with this size deductible, the maximum out-of-pocket enrollees must be prepared to cover could be more than double that amount.

Therefore, the question you should be asking yourself is, am I prepared for an event that could cost me as much as $10,000 in out-of-pocket costs while also experiencing a loss of wages if unable to work during this medical emergency? If the answer is no, you probably need to consider supplementing your employer health care with this type of "gap policy."

The good news is these policies are relatively low in cost, are transferable if you change jobs, usually do not require medical exams and often can be paid for with pretax dollars. So this Christmas consider giving a loved one the piece of mind of knowing you are prepared in the unfortunate event of a medical emergency. It is truly the gift than can give back.

(Past performance is no guarantee of future results. The advice is general in nature and not intended for specific situations)

Luke Davis is the director of operations and compliance at Stewardship Capital in Independence.

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Luke Davis

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