The New World of Supplemental Health Benefits
An increase in consumer awareness of supplemental health benefits has spurred organizations to include wellness and other employer-funded add-ons.
People have become more aware of their financial vulnerabilities since the onset of the COVID-19 pandemic. After a brief uptick during the first part of the pandemic, the savings rate is back down to its lowest point in years.1
Four in ten Americans have less than $300 in savings, and half now carry debt related to medical expenses.2
Another study found that 25 percent of adults purchased life insurance for the first time because of COVID-19.3
But even before the pandemic, increasing healthcare costs forced both employees and employers to look at existing medical plans in more detail and ask: “What is actually covered?” and “Are we paying for what we really need?” Knowing this, employers can critically evaluate not only their medical benefits but also their supplemental plans – particularly because many plans no longer cover some conditions in a relevant way.
A New Way of Viewing Supplemental Health Benefits
With more focus on the relationship between physical, mental and financial wellbeing, there has been an increased demand for paid supplemental benefits. This is especially true with regard to accident, hospital indemnity and critical illness plans.
Hospital indemnity is offered as a supplement to major medical insurance. A typical plan pays a predetermined daily allowance to cover expected and unexpected hospital visits. Before COVID-19, this kind of supplement wasn’t top of mind for most employees. Most employees thought the chances of ending up in the hospital for a prolonged stay were quite low. But the rise in hospitalizations across the country amid the pandemic caused employees and employers to look more closely at the actual value of hospital indemnity coverage after seeing that their health insurance policies didn’t cover the full cost of care. And the average out-of-pocket cost for a person hospitalized with COVID-19 was $4,000.4
Similarly, critical illness coverage provides a lump-sum payment should you be diagnosed with a specific illness from a predetermined list. Before the pandemic, consumers were concerned with major conditions like cancer, diabetes and heart attack coverage. Now, consumers are asking more questions about a broader range of illnesses, including whether COVID-19 and other infectious diseases are covered under a critical illness plan. Carriers have been quick to respond to employer interest.
Plugging Gaps With Add-On Policies
Within this context, more employers are offering supplemental benefits to protect out-of-pocket exposure by providing total healthcare management plans that include major medical, supplemental and wellness benefits. Supplemental medical benefits help cover the out-of-pocket costs that may not be covered by a major medical plan and provide employees with a stronger sense of financial wellbeing should they be affected by a major medical event.
For example, a typical major medical plan can leave about $5,000 for out-of-pocket exposure. This gap can be plugged by adding supplemental benefits to a major medical plan.
Providing employees with this add-on policy comes at little to no extra cost for the employer, but it has the potential to greatly improve the financial wellbeing of employees by saving them an average of about $360 annually for single coverage and about $830 annually for family coverage, according to an Aon analysis.
With the shift toward remote working and digitization becoming more permanent every day, there has been a rise in the use of services such as remote counseling and other telehealth mental health support. With mental health continuing to be the number one employee wellbeing issue since the onset of the pandemic, this service has become key in helping employees with work-life balance and their mental health.5
Aon’s Survey on Health found that 80 percent of employers were offering virtual mental health services such as telemedicine.6 In that same survey, 77 percent of employers said they were offering or interested in offering supplemental health plans.
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The past few years have shown that worst-case scenarios can happen. Employees are looking for peace of mind when it comes to their health, and minimizing out-of-pocket exposure can play an important part in this goal. Employers can easily add value to their benefit packages with supplemental and wellness benefits. These steps can help relieve employees’ stress, enhancing productivity and loyalty.
The pandemic spurred many employers to reevaluate their medical and supplemental benefits to meet their employees’ needs better. But for employers to keep pace with peers and market trends, evaluating benefits must occur at regular intervals, not only when disaster strikes.
1 Americans are saving less after stashing away funds - Marketplace
2 50% Of Americans Now Carry Medical Debt, A New Chronic Condition For Millions (forbes.com)
3 Study Finds COVID-19 Spurs Greater Interest in Life Insurance,” Life Happens
4 https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2789008