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 pandemic. Half of American adults say they couldn’t pay an unexpected $400 bill, nor do they have the savings required to cover three months of living expenses. Another study found that 25% of adults purchased life insurance for the first time because of COVID-19.
But even before the pandemic, the increasing prevalence of high-deductible health plans had 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 the most current conditions in a relevant way.
A New Way of Viewing Supplemental Health Benefits
The perception of the value of supplemental health benefits has changed dramatically for employees and employers, leading to changes in offerings and plan design. Aon has seen an increase in demand for paid supplemental benefits, especially accident, hospital indemnity and critical-illness plans.
Prior to the pandemic, hospital indemnity was offered as a supplement to major medical insurance. A typical plan would pay a predetermined daily allowance to cover expected and unexpected hospital visits. Such a supplement wasn’t top of mind for most employees, who often 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 has 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.
Similarly, critical illness coverage typically provided a lump sum payment should you be diagnosed with a specific illness from a predetermined list. Before the pandemic, consumers were concerned with core provisions 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, and 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 protection should they be affected by a major medical event.
Consider, for instance, a typical major medical plan that leaves about $5,000 for out-of-pocket exposure. This gap can be plugged by combining supplemental benefits with 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 overall 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 a huge shift toward remote working and digitization, we have seen a rise in the use of services such as remote counseling and other telehealth mental health support as an example of a supplemental offering. With mental health having become 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. Indeed, a survey conducted last year of 817 employers found that nearly half were enhancing their healthcare benefits, with 45% expanding their wellness benefit offerings. The same survey found that 77% of employers were also expanding access to remote mental health services.
If the past few years have shown anything, it is 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. In turn, such steps can build employee loyalty and enhance productivity by relieving stress.
The pandemic spurred many employers to reevaluate their medical and supplemental benefits and tailor them to better meet their employees’ needs. But for employers to keep pace with peers and market trends, evaluating benefits must occur at regular intervals, not only when disaster strikes.