Ancillary Health Insurance: Definition and Products
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Summary:
Ancillary health insurance is a secondary healthcare benefit that covers medical expenses sometimes outside the scope of traditional health insurance. Hospital bills and drugs for a medical emergency are types of ancillary insurance that traditional insurers will cover. Ancillary health insurance also takes the form of dental and eye care, which is typically not covered by traditional health insurance, but instead may be offered by an employer.
Health insurance can be a complicated thing to understand. Most people’s idea of health insurance revolves around paying a monthly insurance premium and then going to the doctor. In most insurance plans, there will be some type of deductible as well, that involves the customer paying out of pocket.
However, there are some medical expenses that are not covered by basic health insurance and that people don’t plan for. If you get hit by a car, for instance, will your traditional insurance cover ambulance transportation, drugs, and medical supplies, such as bandages? In some cases, health insurance plans will have additional ancillary coverage for unexpected medical emergencies that require hospital stays.
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Ancillary benefits in a traditional plan
If you are currently paying for health insurance (or group health insurance), you probably want to know if your plan includes ancillary benefits. If you don’t have health insurance and are shopping around, it’s probably a smart idea to get a grasp of what type of ancillary benefits a plan might carry.
Ancillary insurance technically means “additional” or “extra” insurance and it can be a draw for employees that feel that they might benefit from this type of additional insurance. The types of ancillary benefits in a traditional plan focus mainly on medical emergencies.
Hospital benefit
Typically, ancillary benefits will have a number that is multiplied by the daily hospital benefit. Your daily hospital benefit is determined by the cost to keep you in the hospital. This includes your room, bed, medical equipment, doctors, and nurses.
For instance, say that your ancillary health insurance stipulated that you get 10 times the daily hospital benefit. If your daily hospital benefit is $10,000, then your maximum ancillary insurance will cover 10 times that amount, or $100,000.
What are ancillary lines?
Ancillary lines offer financial protection for different types of medical emergencies. These include, but are not limited to, accidents, critical illnesses, and injuries. An ancillary line is another phrase for an ancillary benefit.
Health insurance, ancillary benefits, and employee insurance
The United States medical system stands out from most of the developing world because of its lack of a single-payer system. In the U.S., the majority of people get their health insurance through their employer.
The reason why the system in the US is different is due in large part to World War II (WW2). During WW2, the U.S. government enacted the Stabilization Act of 1942 which capped an employer’s ability to raise wages. To get around this law, many employers started offering employer-sponsored health insurance as an incentive for their employees. This started the trend toward employer-sponsored health insurance.
Today, many employers both offer traditional health insurance and ancillary health insurance. In most cases, employers offering ancillary benefits do so in order to cover things like vision and dental, which are not covered by traditional insurance plans. They do this in two ways: voluntary and employer contributory benefits.
- Voluntary benefits. With voluntary benefits, the employee is splitting the cost of the ancillary health insurance with their employer. Both the employer and employees pay a partial amount for the benefits. Typically the breakdown is 50/50, but the employer is only required to pay up to 49% of the premium cost of the insurance.
- Employer contributory benefits. With employer contributory ancillary benefits, the employer pays more than 50% of the health insurance premiums. They can pay anywhere between 50% to 100%, but they must pay at least 50%.
Common types of ancillary insurance
Most employers will offer ancillary benefits through dental and vision plans. However, there are some additional forms of ancillary insurance that your employer may offer. Here are some of the types available.
Dental insurance
Dental insurance is probably the most common ancillary benefit that employers offer their employees. The type of dental coverage you may receive will differ from the others, and will probably have some combination of copays and deductibles.
Vision insurance
Vision insurance will cover an assortment of different visits and products related to eye health and maintenance. Standard items such as contacts, eye tests, and glasses will be covered by vision insurance. Moreover, some plans might cover more complicated medical procedures such as LASIK surgery.
Disability insurance
Disability insurance is a type of insurance that ensures that you will still earn income if something happens and you become disabled and are not able to work. Typically, disability insurance will agree to pay you a percentage of the income that you earned while working.
Life insurance
Life insurance and group life insurance are two forms of ancillary insurance that are quite prevalent. If you take out a life insurance policy and you die, then that money will be paid to your surviving family through life insurance claims. Group life insurance is offered when the policyholder is an employer or labor union. Group life insurance covers a group of people rather than just a single individual.
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Critical illness insurance
Critical illness insurance is designed to cover medical emergencies that might have lingering effects.
If you have a stroke and half of your body is paralyzed, you probably won’t be able to work in a capacity like you were beforehand. Thus, critical insurance will cover the costs that incur over time to treat your stroke and disability.
Long-term care insurance
Long-term care insurance covers the cost of long-term care in a health facility. Nursing homes and psychiatric wards are examples of places where you might need to spend a significant amount of time, if not the rest of your life. Long-term care insurance will cover you.
Well-being incentives
An employer might offer their employees certain preventive health incentives to encourage them to be healthier, and thus cut down costs on insurance premiums. Gym memberships, discounted yoga classes, and Ayurvedic meditation sessions are some examples of well-being incentives that an employer might offer.
Pro Tip
If your employer does not currently offer any ancillary benefits, then it might be smart to ask why they don’t. Concerns like this can be negotiated as part of an overall compensation package.
Why offer ancillary health insurance as an employer?
If you have a company and are trying to attract the best and brightest employees, offering different ancillary insurance plans could be a smart move.
First and foremost, you can receive reduced FICA contributions by offering such employee benefits through Section 125. This section also allows employees to use pre-tax dollars for these benefits, which can make a huge difference for some employees. Furthermore, if you are offering preventive incentives, you can cut down on any medical claims that might come up down the line. This obviously results in lower medical claims costs.
Apart from being the “right thing to do”, caring for your employers is great PR. Offering ancillary benefits is a great way to attract top talent and provide an additional incentive to top-performing employees.
Key Takeaways
- Ancillary health insurance is insurance that falls outside the scope of a traditional medical insurance plan.
- Traditional insurance plans will have ancillary benefits, such as emergencies that provide hospital benefits coverage.
- Employers may also offer ancillary health insurance by providing employer contributory ancillary benefits or voluntary ancillary benefits.
- Vision and dental are examples of insurance that employees can receive with their pre-tax dollars.
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