Most employees understand what their health insurance does when they go to the doctor or hospital. What they may not be prepared for is everything their health plan doesn’t pay when an accident, serious illness or hospital stay disrupts everyday life.
That’s where supplemental benefits such as accident, critical illness and hospital indemnity insurance can help.
These plans are designed to provide cash benefits directly to an employee when a covered event occurs. Unlike major medical insurance, the benefit generally isn’t restricted to paying a doctor or hospital. Depending on the policy, employees can use the money for deductibles and copays — or for groceries, childcare, transportation, utilities and other expenses that don’t stop just because someone is sick or injured.
Three Different Benefits — Three Different Jobs
Although these products are often grouped together as supplemental benefits, they solve different problems.
Accident Insurance. Accident coverage pays specified benefits when an employee or covered family member experiences a covered accidental injury. Depending on the plan, benefits may be available for things such as emergency treatment, fractures, dislocations, diagnostic tests, ambulance transportation and follow-up care.
Critical Illness Insurance. Critical illness coverage typically provides a lump-sum cash benefit following the diagnosis of a covered serious illness, such as certain cancers, heart attacks or strokes. The employee decides how to use the money.
Hospital Indemnity Insurance. Hospital indemnity coverage pays specified benefits associated with a covered hospital admission or confinement. That can provide an additional financial cushion at precisely the time an employee may be facing both increased medical expenses and disruption to normal household income.
These benefits are not substitutes for major medical insurance. They are designed to work alongside it.
Why This Matters More Than Employees May Realize
Having health insurance and being financially prepared for a serious medical event aren’t necessarily the same thing.
An employee may have excellent medical coverage and still be responsible for a deductible, coinsurance or other out-of-pocket expenses. At the same time, an illness or injury can create expenses that have nothing to do with the medical bill.
That is the gap supplemental benefits are designed to help address.
Cash benefits can give employees greater flexibility because each household’s needs are different. One employee may need help meeting a health plan deductible. Another may need the money for childcare while a spouse is hospitalized. Someone else may simply need help with normal household bills while missing work.
The insurance benefit doesn’t make those decisions for them.
Why Employers Offer Supplemental Benefits
Supplemental benefits can also give employers another way to strengthen their benefits package without necessarily increasing the cost of the core medical plan.
Many plans can be offered on a voluntary basis, allowing employees to choose the coverage they value and pay the premium themselves through payroll deductions. Employers may also choose to contribute toward some coverage depending on their benefits strategy.
That flexibility can be particularly valuable for employers trying to offer employees more choices while controlling the company’s overall benefits budget.
It can also make the benefits conversation about more than simply the health insurance deductible and premium.
The Common Misconception: “It’s Just a Small Check”
The value of supplemental insurance isn’t determined simply by the size of a particular benefit.
The better question is what that money means to an employee at the moment it arrives.
An unexpected accident, cancer diagnosis, heart attack or hospital stay can affect much more than medical expenses. Having additional cash available during that period can help an employee protect household savings and deal with expenses that major medical insurance was never designed to cover.
Of course, benefits, covered conditions, limitations and exclusions vary significantly by policy. That makes understanding the actual coverage important before employees enroll.
The Benefit Employees Need to Understand
Supplemental benefits work best when employees understand what they’re buying.
Simply adding another voluntary product to an enrollment system isn’t enough. Employees should understand what triggers a benefit, how benefits are paid, what isn’t covered and how the coverage complements their existing health plan.
That education matters because the objective isn’t to sell employees as many products as possible.
It’s to give them meaningful choices and enough information to decide which benefits make sense for their own families.
Signs Supplemental Benefits May Be Worth Exploring
Supplemental benefits may deserve a closer look when:
-
Employees are increasingly concerned about deductibles and other out-of-pocket medical expenses.
-
The employer wants to enhance its benefits package without significantly increasing the employer-paid benefits budget.
-
Employees are asking for more voluntary benefit choices.
-
Recruiting and retaining employees has made the overall benefits package more important.
-
The company already offers strong medical insurance but wants to help employees prepare for some of the financial consequences that medical insurance doesn’t address.
None of those automatically means accident, critical illness or hospital indemnity coverage is the right answer. They are reasons to evaluate the options.
Parker’s Perspective
One of the things I want employers and employees to understand is that supplemental benefits aren’t meant to replace good health insurance. They’re designed to help with some of the financial problems that can remain even when you have good health insurance.
The best benefits package isn’t necessarily the one with the most products. It’s the one employees understand and can actually use.
That’s why I think education is especially important with accident, critical illness and hospital indemnity coverage. Employees should know what they’re paying for, when it pays and how it fits with the rest of their benefits.
If you’re reviewing your employee benefits program and want to see whether supplemental benefits could make sense for your company, I’d be happy to walk through the options with you.
Parker Dodd
Employee Benefits Advisor
Agent, Clients First Insurance
This article is intended to educate — not replace professional advice or the terms, conditions, and exclusions of any insurance plan. Every company is different, and benefits decisions should be made after considering your organization’s specific operations, workforce, and circumstances.
Clients First Insurance advises. The client decides.
