Voluntary Insurance: A Closer Look into the Typical Gap Plan
Voluntary insurance, also referred to as worksite voluntary insurance, is the most common type of supplemental health insurance. A few examples of voluntary insurance plans are critical illness, cancer and hospital indemnity.
For years, voluntary insurance has dominated the supplemental market, which is why when employers and brokers think of supplemental insurance, their minds automatically go to this type. Some may even believe that it’s the only type. That’s just not the case. We’ll get into that more later.
Reasons Companies Use Supplemental Insurance
The reasons that most companies turn to supplemental health insurance are either coverage related or talent management related:
- Layer on additional coverage
- Recruit and retain
- Fill coverage gaps
- Offset rising deductibles
- Add variety to benefits
While offering voluntary insurance may seem like a company is providing more value to employees and fulfilling the above purposes, this type of supplemental has some shortfalls that are important to address.
Supplemental voluntary insurance is typically an employee-funded benefit. Since these plans are voluntary, the company makes them available to employees, but in the end, employees choose whether or not to enroll and pay for the plan themselves.
This has two downfalls:
- Improving a benefits package with a benefit employees must pay for isn’t really giving them another benefit. It won’t be seen as an investment into the employee and may not provide the desired boost in talent management.
- Since these plans are often used to fill coverage gaps and help offset employee out-of-pocket costs (we’ll look at this more next), doing so with a benefit they have to pay for themselves is just giving them another financial burden.
Narrow, Event-Driven Coverage
Voluntary insurance also has very narrow coverage as defined by the specified scope of each plan. For example, a hospital indemnity plan typically only provides coverage in the event of hospitalization or for expenses related to hospitalization. That means any other healthcare expenses outside of those specifications won’t be covered. Voluntary insurance works similarly for cancer and critical illness plans as well.
Here are a few issues with this:
- While these plans can successfully fill gaps for unexpected hospitalizations and diseases, depending on the plan, they won’t typically provide any coverage for the everyday healthcare expenses, like physician visits and routine prescriptions, that rack up a lot of employee out-of-pocket expenses.
- Many employees don’t realize that their voluntary insurance plans are event-driven. That means they expect to have coverage after enrolling in and paying for these voluntary insurance plans, but still wind up with a large financial burden if the expense doesn’t fit the specifications.
Caveat: An especially good time to utilize a voluntary insurance plan is if you can foresee a hospitalization, event or disease occurring in the next plan year. An example could be if you plan to be pregnant and know you will have the baby in a hospital in the coming year.
Another Type of Supplemental Health Insurance: Expense Reimbursed Insurance
Expense reimbursed insurance is also a type of supplemental insurance, though it is often overlooked because many employers and brokers don’t know about it.
While it is similar to voluntary insurance in that it is layered on top of the primary health plan and it can be offered to select employee classes, there are two key differences:
- Employer-funded: Expense reimbursed insurance is always completely funded by the employer. And because it can be offered to select employee classes, it can provide a targeted benefits and talent management boost. With this employer-paid benefit, employees understand and appreciate their company’s investment into their wellbeing.
- No event-driven limitations: Expense reimbursed insurance provides coverage for both everyday healthcare expenses and unexpected expenses, without any disease- or event-driven conditions, like voluntary insurance. That makes expense reimbursed insurance a lot more valuable because it really offers a gap-filling solution and additional broad coverage to employees.
Expense reimbursed insurance isn’t your typical supplemental health insurance plan. It’s a lot more than that. Learn more about ArmadaCare’s expense reimbursed insured plans today.