Supplemental Medical Insurance

Supplemental health insurance is also known as defined benefit insurance. This means that the maximum benefits are spelled out in specific dollar amounts.

For example, a policy like this might provide $1,000 per day for hospitalization and that’s it. This makes the policy more predictable and stable for the purpose of long term pricing of hospital services.

Another major differentiator of this type of policy is that the benefits are paid directly to the individual policyholder. Benefit payments can be used to offset income lost because of an injury or illness as well as pay for medical costs.

A disadvantage of supplemental medical insurance is that the policyholder might be left unprotected in case a larger catastrophic claim occurs.

Use of Supplemental Health Insurance

With employers beginning to want to exit the health care business, these policies are becoming more popular because the trend is to pay non catastrophic expenses outside of insurance.

Supplemental Health helps even out the cash flow through a budgeted premium bill. It also provides protection for expenses that become greater than anticipated.

The Cost of Supplemental Health Insurance

The cost of these policies is less than regular health insurance because of the lower benefit payout.

For example, where a traditional medical policy might pay up to 1 million in total medical costs, the supplemental might cap the payout at $50,000.

It’s better to have some limited coverage than have no health insurance at all.

Other Advantages to Supplemental Health Insurance

Payout- Most traditional medical policies allow the company to reduce benefits if any expenses are paid by another policy. For example, if you break your leg in an auto accident, your traditional health insurance will not pay because the auto insurance covers all of the medical costs.

However, supplemental health insurance does just the opposite. For example, it would pay out a cash benefit even though all the bills have already been paid by the auto insurance.

The money might be used to pay deductibles, lost wages or anything the insured wants to use it for.

This provision allows policyholders to buy as much or little coverage as they need.

Preexisting Conditions- This policy provides payments for preexisting conditions. Although there may be a six to twelve month waiting period, many other types of health insurance do not cover preexisting conditions at all.

Two Types of Supplemental Health Insurance

Basic- This policy is designed to help cover the medical charges that occur most often. This means visits to a doctor’s office and lab and other tests are covered. The policy pays a fixed dollar amount for each incident. There are no deductibles or copayments

Advanced- These policies might be a guarantee issue in many states meaning that prior medical history is not an issue. The waiting period for coverage might be six to twelve months.

These policies are generally available only through employers or agents. Like all insurance, the features, costs and benefits must be carefully scrutinized prior to purchasing so the best decision for your individual situation can be made.

Steve Wyrostek -MedicalInsurance.org Expert A 20 year plus veteran of the insurance industry, Steve managed departments in the personal and commercial lines areas of major insurers. He’s familiar with how insurance—ranging from boat to workers compensation—works.