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 April 22, 2020

High Deductibles and Supplemental Health Insurance: What is the Connection?

supplemental health insurance for HDHP

High Deductibles and Supplemental Health Insurance: What is the Connection?

If you have any type of insurance, you’re likely familiar with deductibles. A deductible is the amount you pay for covered health care services before your insurance policy starts to pay.3 For example, with a $2,500 deductible, you pay the first $2,500 of covered services yourself.

After you pay your deductible, you will usually only pay a copayment or coinsurance for further covered services. Your insurance company generally pays the rest.3

There are different types of deductible plans to be aware of, including high-deductible plans.

High-Deductible Plan

This type of plan has a higher deductible than a traditional insurance policy.

For 2020, the IRS defines a high-deductible health plan as any plan with a deductible of at least $1,400 for an individual or $2,700 for a family.4

Typically, policies with lower monthly premiums have higher deductibles. On the other hand, policies with higher monthly premiums will usually have lower deductibles.3

A high-deductible plan (HDHP) can be combined with a health savings account (HSA), allowing you to pay for certain medical services with money free from federal taxes.4

Supplemental Health Insurance

A form of supplemental coverage you can get is a Medicare Supplement policy. A Medicare Supplement policy is not a part of Original Medicare. It can assist in helping with healthcare costs that Original Medicare doesn’t cover, including coinsurance, copayments, or deductibles.6

In total, there are 10 standardized Medicare Supplement insurance policy types available in 47 states.1 In Massachusetts, Minnesota, and Wisconsin, these policies are standardized in a different way.6

It’s important to note these policies are sold by private insurance companies. Therefore, you must already possess Part A and Part B plans to purchase one.6

Medicare-Supplement Coverage

Typically, a Med-Supp policy doesn’t cover the following:7

  • long-term care
  • vision or dental care
  • hearing aids
  • eyeglasses
  • private-duty nursing

However, there are many advantages to having a Med-Supp policy, such as helping to save money for those needing expensive or frequent care.2 Additionally, any standardized Med-Supp policy is guaranteed renewable, even if you have health problems.6 It usually can’t be canceled, as long as you continue to pay the premium.

One of the most notable benefits of Med-Supp is you usually have the ability to see any doctor or health care provider that accepts Medicare assignment, unless you have a Medicare SELECT plan. Also, a referral from your doctor generally isn’t a requirement to visit with a specialist, and can often be used for treatments at major medical facilities. Furthermore, you can generally receive medical services in any state or U.S. territory.2

High-Deductible Supplemental Health Insurance Plans

It’s possible to use secondary insurance to pay your deductibles. Plans offering cash benefits can help pay out-of-pocket costs, such as co-pays and deductibles. Additionally, they can help cover other non-medical expenses, which could include rent, utilities, and transportation costs.5

Pros and Cons

As expected, there are both pros and cons to this. As noted earlier, some advantages include:

  • the potential to have lower premiums, since the deductible cost itself is high
  • the ability to be combined with a health savings account (HSA)

On the other hand, some disadvantages include:

  • having to cover out-of-pocket costs prior to reaching the deductible
  • having to pay for other costs not included in your plan coverage

Making the Connection

It’s important to speak with your insurance company or a licensed insurance agent to learn more about the connection between high deductibles and supplemental coverage. Ultimately, obtaining coverage can help make a difference in the lives of you and your loved ones.

Categories: Supplemental Health Insurance, Insurance

  1. ehealthinsurance.com, What’s the Difference Between Medicare Advantage and Medicare Supplement Insurance, 2020
  2. ehealthinsurance.com, Medicare Advantage vs. Medicare Supplement, 2020
  3. healthcare.gov, Deductible, 2020
  4. healthcare.gov, High Deductible Health Plan (HDHP), 2020
  5. healthmarkets.com, Ways Secondary Health Insurance Can Help, 2020
  6. medicare.gov, Choosing a Medigap Policy, 2020
  7. medicare.gov, What’s Medicare Supplement Insurance (Medigap)?, 2020

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