Myth Busters: Are All Supplemental Insurance Plans Voluntary Insurance Plans?

All Complementary Benefits Executive Health February 28, 2018

Over time, supplemental insurance has become interchangeable with voluntary insurance in the minds of many, both brokers and employers alike. Years of miscommunication and inefficient marketing has led to this misconception which, unfortunately, has a very limiting result.

In actuality, supplemental insurance does not equal voluntary insurance, and this misinterpretation completely cuts out another sub-category of supplemental insurance. Let’s take a closer look.

The Structure

Supplemental is a category of insurance, under which different types of supplemental exist. There are two types of supplemental health insurance that are used to add additional health coverage on top of the primary plan: voluntary insurance and expense reimbursed insurance. So, all voluntary insurance is supplemental insurance, but not all supplemental insurance is voluntary insurance.

If it seems complicated, consider this example. Both dogs and cats are animals. All dogs are animals, but not all animals are dogs. That cuts out cats (and all other animals, for that matter).

When people assume that voluntary insurance is interchangeable for supplemental insurance, they completely limit themselves to just one type of supplemental insurance, cutting out expense reimbursed insurance altogether.

The Two Types

To break this misconception, it’s important to educate yourself on the types of supplemental health insurance and how they are different.

Voluntary Insurance

Voluntary insurance, also known as worksite voluntary, is a type of supplemental insurance that employees can elect to receive. They are generally employee funded, though the employer may elect to contribute. Common voluntary insurance plans are hospital indemnity, critical illness and cancer policies.

These plans typically only offer coverage when narrow conditions are met. They do not offer true comprehensive medical gap coverage. If the specific “event” such as a hospital stay or a specified disease does not occur, then there is no gap coverage at all. This is often overlooked because these plans are commonly marketed as “medical gap” plans.

Because coverage is narrow, it is possible that even with the additional layers of voluntary insurance protection, an employee could incur a financially burdensome expense and receive no coverage because the expense is not within the defined scope. In other words, supplemental voluntary insurance still leaves employees open to risk, due to the limitations.

Expense Reimbursed Insurance

Expense reimbursed insurance, also referred to as medical reimbursement insurance, is a type of supplemental insurance that is typically 100% paid by the employer. Unlike employer-paid primary plans, this type of supplemental plan can be carved out by employee class because it qualifies as an excepted benefit, (not subject to ACA nondiscrimination and other rules).

Unlike voluntary insurance, expense reimbursed insurance does not require a specific event or disease to trigger coverage. Instead, employees simply submit claims for covered expenses and receive reimbursements up to the specified limit.

This kind of coverage is also far more comprehensive than voluntary insurance. The plans offer a broad range of coverage for deductibles, coinsurance and co-pays. Some solutions go even further to reimburse for items not typically covered by the primary plan, like nonformulary Rx and private hospital rooms, as well as vision and dental. Coverage can range from $5,000 to $100,000 max annual.

Closing

While voluntary insurance is a helpful type of supplemental insurance, it’s not the only type. And with supplemental insurance becoming an important aspect of the overall benefits structure, it’s vital to not overlook another valuable option (i.e. expense reimbursed insurance). Check out this recorded webinar to see expense reimbursed insurance in action with case studies!

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