Picking the Best Ancillary Products for Your Needs and Your Budget


December 7, 2017

While millions of Americans get their health insurance through Obamacare, millions more choose to remain uninsured. Many people choose to find health insurance outside of open enrollment by selecting non-Obamacare health plans. Those plans often include ancillary products such as dental, vision, short-term health plans and hospital indemnity insurance.

Although ancillary products on their own don’t meet the minimum essential coverage requirements under the Affordable Care Act, many consumers (especially healthier, younger Americans) are choosing to pay the penalty instead of paying thousands each year in monthly premiums. However, many of these Americans want some type of coverage in place in the event of a medical emergency. If you plan on opting out of major medical health insurance but would like some type of coverage, here are some tips on what to look for when buying ancillary products.

Why People Forgo Major Medical
There is no doubt that picking a healthcare policy all boils down to cost. Monthly premiums, out-of-pocket expenses and other factors determine whether or not you pick a specific major medical plan. Additionally, the type of coverage you receive also determines which plan suits you best.

However, what if you’re a healthy person and don’t want to pay $500/month in premiums or your single with no kids? Do you really need a major medical healthcare plan? What if you just can’t afford health insurance and the skyrocketing prices of premiums? These questions and more are why many Americans are forgoing enrolling in a full-coverage health insurance plans. Instead, many people are choosing alternative healthcare coverage options such as ancillary products.

With the future of the Affordable Care Act up in the air, many Americans are just not bothering enrolling in a health plan. The thinking is, “if Donald Trump and Republicans are going to eliminate Obamacare, what’s the point in signing up on one of the exchanges?” Health care costs are skyrocketing, and many single people and some families see no justification for paying thousands of dollars a year in premiums and thousands more in deductibles. According to the Kaiser Family Foundation, more than 46 percent of Americans remain uninsured because of rising premiums or coverage costs were unaffordable.

Which Ancillary Products Should You Choose

If you decide to pass on a major medical insurance plan, ancillary products like a short term health insurance plan, can help you pay for some of the costs you incur during a medical emergency. However, ancillary products offer far less comprehensive coverage than major medical, so you should never rely on these products to replace a full-coverage health insurance plan. If you require consistent medical treatment, these products are not a suitable option. Here is a closer look at some of the more common ancillary products.

Short Term Health Insurance Plans

Short term health insurance plans are great alternatives to an ACA plan that is usually half of the monthly cost, can oftentimes go into effect the very next day after you apply and have no enrollment period so you can apply for coverage anytime during the year. The national average premium for a short term plan for a 30 year old male is around $100/month. Obviously this is much more affordable than an ACA plan and will protect a family or individual from having to pay medical bills out of pocket if they were previously uninsured. Short term plans look and feel very similar to ACA plans in that they have a monthly premium and an annual deductible. The insured will go to the doctor and present their insurance card for their short term plan and the plan will pay its portion and the insured will pay the rest (a coinsurance payment). The big difference between a short term plan and an ACA plan is that carriers can deny applicants coverage due to a pre-existing condition, or they may offer coverage but will not pay for any medical bills that relate to a pre-existing condition. If a person has a serious medical issue or if they are pregnant or planning to get pregnant (a medical issue that a short term plan will not cover), then an ACA plan would be best.

Catastrophic Health Insurance Plans

These plans might make sense if you’re under 30 and don’t need regular medical care. Also known as high-deductible plans, companies that offer catastrophic coverage only provide limited benefits in exchange for very low monthly premiums. As the name implies, when a catastrophic event occurs, and your medical bills start to stack up, these plans help you pay for some of your healthcare costs.

The deductibles on these plans can reach $6,000 per person or more per year, so you’re on the hook for all your medical expenses until you meet your yearly deductible. With deductibles that high, you might be wondering why you should even bother. Well, many healthy, younger Americans often don’t need medical services throughout any given year but prefer having a safety net in the event of a catastrophic event. Also, many Americans just don’t have the money to pay for comprehensive coverage but would like to have some form of health insurance for themselves and their families.

Health Benefit Insurance

This type of health insurance plan provides you with a financial shelter if you need common medical services such as doctor’s visits or hospital stays. Unlike traditional insurance that pays your medical provider directly, health benefit insurance pays you directly. Health benefit insurance is a smart choice if you don’t need major medical or you’re outside of the open enrollment period for Obamacare. These plans typically offer a “fixed-dollar benefit”, which means that the money the plan will pay you when you need medical care is a fixed-dollar amount. These plans also go by the name hospital indemnity plans.

Health benefit plans are relatively new to the insurance market. The plans offer many different coverage options that might include accident coverage or critical illness coverage. One way to look at health benefit insurance is to think of an insurance company combining several different ancillary products into to one plan. However, these plans are not a replacement for major medical, and as long as the individual mandate still exists under the ACA, does not qualify as minimal essential coverage.

Other Types of Ancillary Products

Ancillary products range from cancer and critical illness coverage to accident coverage and hospital indemnity insurance. The type of coverage you receive for each plan depends on the carrier and how much coverage you think you need. For example, hospital indemnity plans typically pay for each day that you’re in a hospital, but the dollar amount depends on the level of coverage you choose.

Another example is accident plans. The amount you receive depends on the type of injury you suffered from an accident. You may receive more for the treatment of a broken leg than you would a broken ankle. If you suffered a critical illness or you were diagnosed with cancer, one of these plans might pay you a lump sum for immediate costs related to the illness. It all depends on the insurance carrier and the level coverage you think you need.

Ancillary products are a smart choice if you’re single, young, healthy and don’t need major medical. The products can offer you a protective umbrella in the event of a medical emergency. Some monthly premiums cost as little as $30/month. However, those inexpensive monthly premiums come with a tradeoff, limited coverage. The yearly deductibles are typically high with you paying up to $6,000 or more per year per person before the insurance company pays you any benefits. The most important takeaway is ancillary products are not designed as a replacement for major medical insurance policies.