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Supplemental insurance plans attempt to fill Obamacare gap

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The nation is waiting to see what will happen when the insurance exchanges and other mandates of the Patient Protection and Affordable Care Act known as Obamacare go into effect Oct. 1.

Some employers are reducing employee hours so they don’t have to provide health care to part-time workers while other cost-cutting measures include raising deductibles, co-payments and premiums.

But another insurance market is becoming more vibrant to fill some of the gaps left in Obamacare’s wake – the hospital indemnity insurance provider.

“We provide solutions for employers and employees to help fill gaps in coverage and replace lost income and help pay bills during times of accident and sickness,” said Andrew Racek, worksite solutions consultant with HM Insurance Group of Highmark Insurance.

The group is known for its term life insurance, group disability, accident and critical illness plans, but the most recent addition of hospital indemnity coverage gives large and small businesses the opportunity to help their employees obtain extra protection.

Hospital indemnity pays a fixed amount per day to covered members when an accident or illness strikes and aims to cover the gap created between what is covered by a traditional health insurance plan and the remaining out-of-pocket expenses that can accompany an illness or injury, according to HM Insurance Group.

Out-of-pocket expenses “could be paying for deductibles and co-pays, but also replace lost income, travel costs to and from physician’s offices,” Racek said. “It could be dependent care expenses while someone is injured or sick.”

The funds are paid directly to the insured so that the covered person can use that money to pay the bills – the benefit isn’t paid to a provider, according to HM Insurance Group.

It’s a similar concept to what some plans have been providing to supplement Medicare or the military’s Tricare, but there is a sense of urgency because many costs are expected to rise for the working well under Obamacare.

“It sounds kind of like Medigap insurance,” said Thomas J. Croyle, president of the Lehigh Valley Business Coalition on Healthcare. “A lot of programs and policies are moving to high-deductible plans, and maybe they’re covering some of that through these things.”

According to Croyle, employers who insure their own workers can get something similar: a stop-loss policy to protect their companies from catastrophic losses.

“Our employer groups are free to pick their own plan design and features, because most of them are in fact, self insured,” Croyle said. “They’re paying a fee to protect themselves against really large claims so when they buy stop-loss insurance, they don’t get the $2 million heart-lung transplant hitting them in a particular year.”

While the concept is similar for a large employer to fill the gaps anticipated in existing and new health care plans, Racek aims to help businesses in the less-than-50 or 50-and-more employee categories, as long as at least 10 workers purchase a supplemental package.

“Ours is a group product, and because of that the coverage is very affordable,” Racek said. “The cost for an individual coverage is available for less than $3 per week and for a family just more than $8 a week.”

Supplemental plans may be a good choice for part-time employees with schedules reduced to fewer than 30 hours per week. There are individual rate plans too.

“That will create a financial exposure to employees, and the hospital indemnity product is designed to help fill that gap,” Racek said. “The products are available for employees working 15 hours per week or more. There’s no pre-existing condition limitation under the program, and that’s definitely a big selling point.”

A Pittsburgh-based company, HM Insurance Group has ramped up efforts in Eastern and Central Pennsylvania through its hospital indemnity and other supplemental products. Racek encourages prospective clients to compare programs based on cost, what the plan will cover and how much it will pay.

The supplemental insurance market reflects a reaction toward larger deductibles that could make some traditional health insurance ineffective.

“People really have to be careful. If you’re buying a plan just based on the monthly payment and you can’t afford the deductible or co-pays for services, you’re really not accomplishing anything,” Croyle said. “That has been the trend. We’re seeing deductibles four or five thousand dollars per person, $10,000 per family, and I’m concerned about that, that people would forego services or not pay the provider.”

So some “providers are demanding payment up front,” Croyle said. “It could be a pretty messy situation.”

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