Defining Supplemental: The Hard-Hitting Questions

All Complementary Benefits Executive Health March 29, 2017

We’ve talked a lot about supplemental on our blog (here, here and here, for instance), but out in the market, we’ve noticed some confusion surrounding what supplemental actually means.

A simple Google search won’t result in a very concrete definition, so we at Armada have taken it upon ourselves to answer the question of all questions: What is supplemental?

Here’s the simple answer:

Supplemental plans and tools work in conjunction with your primary healthcare plan to provide additional coverage for out-of-pocket health expenses. Supplemental will never replace primary plans because it’s not intended to provide base coverage. On the contrary, it’s designed to layer on top to expand your coverage beyond what is possible with your primary plan alone.

So why are companies turning to supplemental if it’s only ‘additional’?

In today’s market, primary plans can’t provide the robust coverage that they once could. Primary plans are becoming more expensive while coverage is simultaneously shrinking. This is resulting in more coverage gaps than ever before where people have to pay for health expenses out of their own pockets. Supplemental provides a way to combat those expenses with additional (and necessary) coverage.

Companies are also having a harder time recruiting and retaining key employees, and supplemental benefits that provide more coverage can set them apart to hook the talent they want.

Here’s where it gets complicated. There are 3 different types. I’ll give you a brief summary of each below:

1. Health Accounts (HRAs, HSAs, FSAs)

Accounts that use pre-tax dollars to save for health expenses. They can be employer or employee contributed. While considered supplemental, these accounts are NOT insurance. Funds can be used only as they are accumulated in the accounts.

2. Worksite Voluntary Plans

Insurance that provides additional coverage inside a defined scope. For example: hospital indemnity or critical illness insurance. Coverage is triggered ONLY when a specific event, like hospitalization or one of the specified illnesses, occurs. More every day expenses, like doctor co-pays or generic prescriptions won’t be covered. These plans are typically opted-into by the employee.

3. Expense Reimbursed Insured Plans

Insurance that reimburses for qualified medical expenses, which cuts down on out-of-pocket health expenses. This kind of coverage is not event-driven and instead provides coverage when its needed. This type of plan can qualify as an excepted benefit, which means it can be offered to select employee classes. Some may also provide tax-savings.

Learn more about Ultimate Health, a supplemental expense reimbursed insured plan.

All three types of supplemental tools are growing in popularity as the demand for these types of products rises. It’s been predicted that these kinds of plans will be fundamental to benefit structures in the years to come!

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