Gap Health Insurance Plan


September 1, 2017

Health insurance should be expansive enough to cover all your medical expenses. In reality, there are co-payments, non-covered expenses and deductibles that you must pay out of your own pocket. Even employer-sponsored health insurance – which covers most of the people with insurance – requires employees to foot some of the bill, which can add up quickly. According to the Kaiser Foundation, 83 percent of employees have healthcare deductibles and the average deductible is over $1,400, up 49 percent since 2011. Medical gap insurance can help you manage these out-of-pocket costs.

What is Gap Insurance?

Medical gap insurance is supplemental insurance that works with your major medical healthcare plan to help you with your out-of-pocket costs. These policies provide a lump sum payment for covered illnesses and accidents. You can use the funds to pay co-payments, prescription drug costs, living expenses, medical bills before you meet your deductible, and other non-covered healthcare expenses. Gap insurance has been called insurance for your insurance because it covers costs that your healthcare plan may not.

Combatting High Premiums

One of the reason that gap health coverage is growing in popularity is the need to keep premiums low. In 2016, more than 90 percent of people using the insurance marketplace chose a plan with a deductible higher than $3,000 in order to keep their premiums affordable. In addition, some businesses are raising deductibles on healthcare provided to employees, also to keep premiums low. These higher deductibles can be devastating if you do not have savings set aside to cover them during an illness or injury. Because gap healthcare plans have fairly low premiums, purchasing them is less costly than paying high deductibles out of your own pocket.

How Gap Insurance Works

Every gap healthcare plan works differently, but they typically cover the expenses that your major medical does not. In addition, you may be able to use your gap insurance for living expenses while you are in the hospital or recovering from an illness or injury. Some of the benefits are offered through health savings account (HSA), where you place a certain amount of money in an account that you can draw on to pay medical expenses.

You cannot have a gap plan and an HSA, and most financial advisors suggest using the HSA rather than the gap insurance. However, if your deductibles and co-pays are very high, you may need to put aside hundreds each month to cover costs if you use an HSA. Because gap coverage can be as low as $50 per month, it tends to be better for most budgets. There may be some restrictions on what is covered under gap insurance. For instance, some plans don’t cover lab work or mental health services. You may also be refused coverage if you have pre-existing conditions.

Gap insurance can be beneficial if you have high deductibles and co-payments. It can also help you pay living expenses if you’re sick or injured. Before signing up, read the entire policy to be sure that it meets the needs of your family.