• Mike Riska

Bundled Supplemental Benefits Offset High Deductibles

If you're a group benefits broker, business owner, or HR professional you have probably already encountered this scenario: you want to introduce a High Deductible Health Plan but are worried about employee backlash. They know that the tradeoff for lower premiums is more money out of their pocket as soon as they need to use the plan and they know they can't afford it. It's the old saying about being stuck between a rock and a, well, basically another rock.


But what if you could use that premium savings to give employees a better way to protect themselves from the out-of-pocket exposure of a high deductible?



This is an illustration of the choice employees have to make between higher premiums on the left and higher out-of-pocket costs on the right. Or wait, maybe it was higher premiums on the right?




A Greatest Hits of Supplemental Plans


One strategy we use for this scenario is bundled supplemental benefit plans. They take the most-used benefits from Accident, Hospital and Critical Illness plans and combine them into one package. The employee then has cash benefits available for a wide variety of situations that would trigger an out-of-pocket medical expense under an HDHP.


Traditionally, access to these benefits would require purchasing multiple insurance plans. This method streamlines the benefits and makes them more affordable at the same time. The plans can be employer funded, employee funded, or a mix of both.


Impact that Matters


There are other strategies you can use in this situation. In the future I'll cover Gap plans, HSAs and some of the other hedges against high deductibles we use. But there's a simple reason this type of benefit is gaining so much traction with our clients -- it can provide the most benefit to the most people in the broadest variety of situations.


67% of employees stress about having money to cover out-of-pocket medical expenses (Mercer, 2019)

This is important from an employee's perspective in a very fundamental way. Last year Mercer released a stat that says 67% of employees experience stress about having enough money to cover out-of-pocket medical costs. Nobody thinks that's gotten better this year; money worries are probably worse now than anyone can remember.


So if you have a high deductible health plan and, let's say your spouse has a heart attack, you likely don't have $2000 (or $4000, or $6000) on hand to meet your deductible. If you're the average American you have less than $1000. And even if you had a $0 deductible, that plan isn't going to give you any money at all to offset your lost wages, or put food on your table, while you care for your suddenly sick spouse.


In this situation a bundled supplemental plan can pay cash benefits for the heart attack (that's the critical illness component) and the hospital stay (the hospital component) and, depending on your deductible, have you breaking even or even a little better. In the same situation a Gap plan might only pay an in-hospital benefit and an HSA account could still be years away from having enough funds in it to matter.


If It Quacks Like a Duck...


I usually avoid plugging specific carriers in these articles -- we're always going to review a bunch of them to find the right products for you -- but Aflac Group is the only carrier we see really nailing this category. Their BenExtend product combines three categories of supplemental insurance into one plan the way I described, then makes it available guaranteed issue, with no pre-existing condition limitations and no benefit reductions at any age. You can cover the whole family and you can take the plan with you wherever you go. And, to top it all off, they throw in a health advocacy service and a financial/legal fitness service for free. The price is good enough that we see employees who make the move to their company's high deductible plan use the savings to buy it and sometimes even another voluntary benefit.

These are the images you're left with after the cease-and-desist order from the big carrier


Next Up, Case Studies!


High Deductible Health Plans are here to stay, so brokers, employers and HR professionals have to get creative with ways to strike a balance between good coverage and affordable coverage. Bundled supplemental plans can be a solution. Next article I'll go beyond the basic concept and give you a case study, so we can look at how the numbers work on this. We'll do it from the employer's perspective if they're considering footing some or all of the cost, and from the employee's perspective with some real-life premium and claims examples.

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