Gap Health Insurance

Supplemental insurance to help fill the gaps in your major medical plan
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Individual Marketplace major medical deductibles in 2020 range from $1,519 (Gold plan) to $6,506 (Bronze plan).[1]

Do you have enough money (or funds in a health savings account) to meet your annual major medical deductible if you have a covered accident or critical illness? If not, think gap health insurance.

For example, gap insurance can include critical illness + accident insurance coverage that provides a fixed lump-sum benefit as a result of a covered critical illness. This lump-sum payment can be used any way you see fit. Accident coverage is available for covered expenses incurred, up to a maximum benefit limit, whichever is less.

What Gap May Cover
  • Broken bones

  • Life-threatening cancer

  • Heart attack

  • Kidney failure

  • Stroke

  • Coma

  • Coronary bypass

  • Loss of sight, speech or hearing

  • Major organ transplant

  • Paralysis

  • Severe burn

What Gap May Not Cover
  • Preventive care such as routine physicals

  • Any non-medically necessary or experimental procedures

  • Injuries or illness related to participating in extreme or dangerous activities (rock climbing, skydiving, private aviation, etc.) or sustained at work or under the influence of drugs or alcohol

  • Medical expenses incurred prior to the policy effective date or after the expiration date

Pros and Cons of Gap Health Insurance

  • You choose how to use benefits payments – There is no restriction on how to use the money you receive, whether for medical costs or to pay for groceries.
  • Apply year-round – There is no official open enrollment period and, in most cases, coverage begins the next day after you enroll online.
  • A plan for every budget – There are different levels of coverage to meet different needs.
  • Keep your doctor – No provider network limitations for fixed indemnity plans means you can visit your preferred healthcare provider.
  • Unlike ACA plans, premiums are based on age and health – The younger and healthier you are the lower your monthly premium, conversely, older and sicker individuals will pay more.
  • Pre-existing conditions are not covered
  • Not ACA-qualifying major medical coverage – Gap insurance is a form of supplemental health insurance, not ACA-qualifying major medical coverage.

Find Answers to Gap Health Insurance Questions

If you experience a covered illness or injury, with some gap policies, you receive a lump sum benefit payment that you may use to help cover out-of-pocket expenses associated with your major medical plan, such as deductible, copayment and coinsurance amounts. Once your medical gap policy has paid the maximum benefits allowed under the plan for the year, no more benefits are available until the next policy year. No Coordination of Benefits Your gap health insurance benefits ordinarily do not coordinate with your major medical insurance coverage. Coordination of benefits is the process of determining which insurance benefits will be applied first, second, third, etc., when you have multiple insurance plans.[2] Rather, your medical gap plan benefit amount is determined by the eligible expenses you incur and your policy’s benefit limit, rather than being based on the amount not covered by your ACA plan. Gap Health Insurance Examples Let’s say you’ve purchased a medical gap plan that has a lifetime limit of $10,000 in benefits for covered illnesses or injuries, and are enrolled in a bronze plan with the average 2019 deductible of $6,258.[3] If you suffer a heart attack and incur the typical hospitalization and related costs of $20,246 associated with this condition,[4] your medical gap policy will pay $10,000 in benefits. You will still have $10,246 in costs, most of which will likely be covered by your major medical policy after the deductible has been satisfied. Now let’s look at how that same medical gap plan would pay benefits for another, less-costly eligible expense. If you break your arm and incur the average costs of $2,500 for non-surgical treatment,[5] your medical gap policy will pay $2,500. As long as you continue to pay your gap health insurance premiums, your policy will have $7,500 available to be paid as benefits for future expenses associated with an eligible illness or injury.
As high deductible health plan (HDHP) enrollments become more common,[6] many people may find medical gap insurance helpful in covering some out-of-pocket costs not covered by their major medical insurance plan. For 2020, any plan with a deductible of at least $1,400 for an individual or $2,800 for a family is considered a HDHP.[7] An individual may incur up to $6,900, and a family up to $13,800, in out-of-pocket costs (including deductibles, copayments and coinsurance), before reaching the plan’s annual out-of-pocket maximum, at which point eligible expenses are paid by the insured’s major medical plan.[8] Because you pay more healthcare costs yourself with an HDHP,[9] gap health insurance can help you cover your portion of expenses until you’re able to access your major medical plan’s benefits.
No, generally you are not restricted in how you use your benefit payments. Use your payments to cover your deductible, coinsurance or copayments, or personal expenses such as housing, transportation, groceries or childcare – it’s up to you.