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What is Supplemental Insurance? Health, Dental, Life, & Medicare Plans

Jordan Beaumont
Financial Guru
Updated: 6/2019
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What is Supplemental Insurance and Is It Worth ItWhen it comes to medical insurance, there are usually gaps in coverage that leave you with unexpected medical bills. Supplemental Insurance can cover many of those costs that your primary policy considers your legitimate out-of-pocket expenses.

Whether you need to purchase a supplemental policy depends on coverage provided by your current health insurance, and the difference between that amount and the amount charged by the provider. It is highly probable that you will find yourself lacking in coverage in some area. You will need to consider the costs you currently have and compare them to supplemental insurance policy premiums. This will tell you if you will save money with supplemental insurance. Supplemental health insurance is also known as gap insurance for this reason.

Supplemental insurance policies can be especially important for people who find themselves in a situation where their primary insurance might leave them with medical bills that ultimately mean serious financial issues. If your deductible or out-of-pocket expense maximums will put you in greater debt, or in other words if your savings account would not cover the worst-case scenario presented by your health insurance, then supplemental insurance should be an important investment.

Most people find themselves in a position where they do not have the extra funds to even pay for an extra $1,000 in medical expenses that might come from unexpected circumstances. If you find that your savings will not cover expenses if you find yourself having to take time off work due to an illness or injury, then supplemental insurance should be an important expense.

Table of Contents

Medical Necessity

Most insurance policies cover services considered a medical necessity. There are times when medical necessity and medical reality do not agree. This is when the provider bills you for the difference between the two amounts. The term medical necessity refers to medical tests, services, or procedures that are required to treat a diagnosis made by a medical doctor.

Medical necessity definitions differ between insurance providers. It is not just treatment; it is also those services necessary in the prevention, or diagnosis of an illness, disease, condition, injury or related symptoms. All must meet accepted standards of medicine. Every health insurance policy, including Medicare and Medicaid, has their own lists of what they consider a medical necessity. You can check with your insurance provider for their list. You can also compare it to state and national lists.

Typically, coverage will fall short if you are required to stay in the hospital longer than the length of stay as approved by your insurance. There also might be limits as to how many specific services, tests, or treatments you may receive, or the amount of money that insurance will pay as opposed to the fees that the treatment facility will charge. Making sure that you know all of your options and that you have discussed them with your physician.

There are times that the doctor can prove necessity of a test, treatment or medication not usually approved by your insurance provider. This also applies to prescription drugs that some policies may not cover but that the doctor feels will be the best treatment for you. Getting your physician involved is an important step in the process.

What is Supplemental Insurance and Is It Worth It

Managed Healthcare Plans

Many insurance plans require that you go to specific in-network hospitals or treatment facilities. If you seek assistance outside of that network, your insurance may not cover the costs. Part of this problem comes from the type of insurance that you have. Most insurance providers keep your costs down by placing you in a Managed Healthcare Plan. These plans differ from traditional plans in that you are required to follow specific rules when choosing your doctor or treatment facility.

There are four primary Managed Healthcare Plans, and the main difference is flexibility as far as choosing exactly who your care provider (doctor, hospital, and laboratory) will be. Venturing outside those strictly defined parameters can give the insurance company reason to refuse to pay or pay a smaller amount, and can leave you with significant medical bills as a result.

Health Maintenance Organization (HMO)

An HMO is probably the most restrictive of the Managed Healthcare Plans. If your provider is an HMO, then you are restricted to specific doctors who contract with the HMO. An HMO will only pay for out-of-network care in an emergency. Most HMOs will focus on wellness and prevention. They prefer an integrated care approach and may even require you to live in its specific service area in order to be covered.

Exclusive Provider Organization (EPO)

This type of Managed Care Plan will pay for services by doctors, specialists, hospitals and other treatment facilities only if they are a part of their network.

Point of Service (POS)

This Managed Healthcare Plan will charge a lower premium if you use the providers within their network. They require you to get a referral from your chosen primary care doctor should you need to see a specialist .

Preferred Provider Organization (PPO)

This is the least restrictive type of Managed Healthcare Plan will offer you a lower premium if you use providers in their network. Should you seek care from providers and hospitals outside of that network without a referral, the plan will pay but there will be additional costs.

Indemnity Health Insurance Plans

Indemnity health policies allow you to choose which doctors and hospitals you use while paying for a set portion of any costs incurred. You are not required to choose a primary care physician. You do not need a referral to see a specialist or to get paid to see that specialist. There may be significantly more paperwork involved as you will need to file claims for reimbursement for every event. Wellness checkups and other preventive care services and routine care may not be covered by this kind of health plan.

While you do have the ability to choose your own doctors, hospitals, and other health care facilities, this ability comes at a cost. While Managed Care Plans have agreements with providers as to what amount of money will be accepted for each service, an indemnity plan might not have agreements in place with providers, so you should not expect any discounts. You might be responsible for paying the difference between charges and the amount charged by the provider. This difference can come at a significant cost.

Value-based Care

In this scenario, the providers are paid based on the outcome of the patient’s health. They are rewarded when their patients show improved health. The thought process is that the patient will live healthier lives and will have less of a chance of developing chronic disease. This scenario is different from the traditional payment for service approach because providers receive pay by measuring the health outcomes against the costs of providing the services that allow the patients to enjoy a healthier life.

There are a number of benefits to this healthcare system as everyone benefits: patients, providers, and society in general. This is because the patient achieves better health while spending less money. The system focuses on patient recovery in a manner that is faster and more thorough. With the faster recovery, patients avoid other diseases and conditions which allow them to spend less time on doctor visits.

Fewer medical tests and procedures will be needed. They won’t need as many prescriptions. Ultimately, as a larger part of society follows this plan, theory holds that society as a whole will be much healthier.

What is Supplemental Insurance and Is It Worth It

Types of Supplemental Insurance

While good planning and basic health insurance options can take care of a lot of things, it is very general. Supplemental insurance focuses on only one specific area of coverage. It is an additional layer that you can purchase to cover some of those areas that traditional health insurance plans do not cover. These policies can cover some of the expenses left behind by your primary insurance plan, including copayments and deductibles.

These supplemental plans will usually pay benefits periodically or in one lump sum. Lump sum payments can then be used to pay for expenses that result from lost wages and medications that may result from an unexpected illness or injury. There are several different types of supplemental insurance:

Critical Care Insurance

This type of insurance provides coverage for more serious illnesses such as organ transplant, cancer, heart attack, organ failure, stroke, and other conditions more life-threatening in nature. Some of these policies will only cover one type of illness or disease, and should you find yourself diagnosed with such, you might qualify for benefits paid for procedures, treatments, or even a minimum daily benefit. There will also most likely be a lifetime policy maximum.

Accident Health/Accidental Death and Dismemberment

Two very popular supplemental insurances are the Accidental Health and the Accidental Death and Dismemberment policies. They are frequently combined. Local regulations in each state will provide varying coverage. These policies will pay the beneficiary a relatively large lump sum. If the accident resulted in a loss of sight, limb, or permanent paralysis, a smaller lump sum would pay. This supplemental plan would not pay for death by illness, natural causes, or suicide.

If the supplement is an Accident Hospital Indemnity plan, other costs that result from an accident might pay for extended home services in addition to travel expenses for members of the family. These policies are important for people who are healthy and therefore pay high deductible regular plan as they provide extra care in case of an unseen emergency situation.

Hospital Indemnity Insurance

If you are in the hospital due to illness or injury, after a short waiting period, this plan would pay cash benefits in either weekly payments or lump sum. These benefits are meant for costs not covered by your primary insurance plan. It can be helpful for covering lost wages during an extended hospital stay.

Short Term Disability Insurance

This supplemental insurance is usually available through your employer. It covers a certain percentage of your pay once your sick time runs out.

Long Term Disability Insurance

Similar to the Short Term Disability plans, this plan would pay a monthly benefit equal to a percentage of your pay in the event that you are rendered disabled by an illness or injury that does qualify for coverage under your primary health coverage. This coverage is a continuation for when the Short Term Disability benefits run out.

Long Term Care Insurance

Long Term Care insurance is one of the more popular supplemental policies. While it would make sense to purchase this type of policy as one approaches retirement age, it is actually recommended that this insurance be put in place between the ages of 45-50. This insurance pays for nursing home, assisted living, hospice, respite, or Alzheimer’s Care facility expenses that are not covered by Medicare. With life expectancies growing longer, it is estimated that 70% of the population over the age of 65 will require long term care.

In the past, people relied upon family members to assist with their care later in life. As people remain more independent and employed longer than past generations, they prefer to pay their own way without becoming either a physical or financial burden on family members.

For those who find themselves in a low-income state later in life, Medicaid will cover Long Term Care for those whose retirement assets and funds may become exhausted due to medical bills and hospitalization as the retiree ages.

What is Supplemental Insurance and Is It Worth It

Dental Insurance

Dental care is a need shared by everyone, whether preventive or in case of emergency. It is also one area of your health that is usually seriously lacking in coverage under regular primary health insurance policies. This common supplemental insurance can aid in the payment of orthodontia, periodontia, oral surgery, dentures, and the yearly wellness exams.

Without this particular type of supplemental insurance, dental costs can become overwhelming in the case of emergency dental services. These supplemental plans are usually quite inexpensive in relation to the amount of coverage you can use. It’s always ideal to find the best dental insurance for your situation. 

Vision Care

Anyone with less than perfect eyesight can tell you that yearly optical appointments and new glasses can be very expensive. If you opt instead for contact lenses, that is a more regular expense that can become a burden. Vision plans are usually inexpensive supplemental policies. These plans cover an area that is usually not covered under regular health insurance plans. We can help you find cheap contacts, just click on the link. 

Travel Insurance

Travel health insurance is actually considered a short term policy rather than a supplemental one. If you travel extensively for personal time off, you never know when you might become injured or ill while in another country. Primary insurance doesn’t pay outside the country when you are traveling for personal reasons. If you have ever become ill while on vacation, then finding the best short term health insurance policy is right for you. These policies should only be purchased for the time you are actually out of the country on vacation.

Medicare Supplement/Medigap

Once you officially reach retirement age, you will qualify for Medicare through the federal government. Medicare provides coverage under Part A, Part B, and Part D. Medicare Part A covers inpatient hospital costs. Part B covers regular doctor visits and outpatient treatments. Part D covers prescription costs. Prescription drug coverage is usually one that you need to go through a provider other than the federal government. Prescription costs can become overwhelming quite quickly without Part D coverage.

Medicare does not cover everything, and most Medicare recipients find themselves either needing secondary insurance in the form of Medicaid or through one of several variations of supplemental insurance available to those already on or coming up on qualifying for Medicare to cover expenses such as copays. These are also known as Medigap plans.

These plans are usually only available to those who become eligible for Medicare due to their age. Providers of supplemental insurance are not required to sell these policies to those who qualify for Medicare prior to the age of 65 due to disability. This availability is controlled by each individual state.

There are ten different types of Medigap insurance available that have been standardized since 1991, and assigned a letter a-l. These plans cover anything from the most basic supplemental needs all the way up to covering copays, deductible, and emergency travel insurance. There is no coverage for dental or vision under Medicare either with or without a Medigap plan.

Many seniors find themselves in a position where they will require Medicaid as their secondary insurance. Medicaid is also usually heavily relied upon by those who qualify for Medicare before the age of 65 due to disability. Medicaid will cover dental emergencies and help control prescription costs. Those over the age of 65 who qualify for Medicaid as their secondary insurance are ones whose retirement funds place them at or below the poverty line, or whose funds and assets have been depleted by bills associated with medical emergencies.

Final Thoughts

It is important that you know what your primary insurance truly covers before making the decision to buy supplemental policies. If your insurance is through your employer, they will most likely offer the supplemental policies most necessary. If your insurance is private, you will want to speak to your insurance broker to find providers offering those supplemental policies to fulfill your personal needs.

For most people, supplemental insurance of one type or another is not only worth it, it is essential as well. While it is everyone’s wish to stay healthy and not need to think about some of these things, reality is that almost everyone runs into one emergency or another in their lifetime that will need to be recovered by things that only a supplemental policy can offer.

If you’re looking for term life insurance quotes, we have you covered. 

FAQ

As you age, one of the most important decisions you will have to make is what kind of supplemental insurance you should get. In this FAQ section, I hope to answer every and any question about supplemental insurance policies that you need.

General Supplemental Insurance FAQs

In this section you will find frequently asked questions pertaining to general supplemental insurance questions.

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What is supplemental life insurance?

Supplemental life insurance is a form of additional life insurance. While it is not meant to take on the place of a permanent life insurance policy, it can help give you extra coverage in the case of something worse happening to you.

Is supplemental insurance worth it?

This depends on a multitude of factors, such as how much life insurance you already have in place, the limitations of your current life insurance policy and how much it costs.

What is supplemental car insurance?

Supplemental car insurance is insurance that is purchased to cover potential damages to another driver in the case you cause an accident. The policy is typically purchased before you rent a car.

How does supplemental insurance work?

Supplemental insurance works by covering for services or out-of-pocket expenses that your regular insurance doesn’t cover. This type of insurance will help to cover costs such as deductibles and copayments.

How does supplemental health insurance work?

Supplemental health insurance works by covering anything above the minimal essentials covered by your medical insurance plan. This type of health insurance can help cover deductibles and co-payments that your insurance doesn’t cover under its normal plan.

What is supplemental life insurance from Cigna?

The supplemental life insurance offered by Cigna is an insurance policy granted to help pay for out-of-pocket expenses whenever you suffer from a serious illness or accident such as a deductible or a co-payment.

What is child supplemental life insurance?

This type of supplemental life insurance is granted based on the child’s age and coverage level chosen by the parent. This is a type of insurance that helps to cover out-of-pocket costs for important medical expenses.

Why should elders purchase supplemental insurance near their 65th birthday?

The reason why elders should purchase supplemental insurance near their 65th birthday is because if they are eligible for Part A coverage, they are unable to keep their subsidies whenever they qualify for Medicare, which is at the age of 65. Supplemental insurance can help cover costs that are lost in the process.

Can you claim supplemental health insurance on taxes?

Yes. You can claim supplemental health insurance on taxes. Most premiums are deductible on taxes as a medical expense, as long as they are medically related. You will need to write the total cost of your deductible under section A on a 1040 tax form.

Is Aflac supplemental insurance worth it?

Yes, Aflac supplemental insurance is worth it, but it all comes down to your lifestyle. If you tend to be accident prone or a person who take an unnecessary amount of risk on a regular basis, then supplemental insurance from Aflac is perfect for you.

What is supplemental life insurance for spouse?

Supplemental life insurance for spouse is just as the name implies: a supplemental insurance policy for your spouse. It holds the same benefits as supplemental life insurance for yourself: to cover costs that your health insurance won’t cover.

Is Supplemental AD&D insurance worth it?

This ultimately depends on your line of work. If you work in a field where you are at risk of a serious injury that could potentially lead to death, then yes, this type of supplemental insurance is worth it.

What is supplemental LTD insurance?

Supplemental LTD insurance is a supplemental long-term disability insurance that helps to pay a monthly payment in the event you are unable to work because of a serious illness or injury.

How much is supplemental insurance for seniors?

The price of supplemental insurance for seniors ultimately depends on the Medigap Plan you choose to go with. Supplement insurance plans can range in price from $70 to as high as $450 a month.

Can you deduct supplemental insurance premiums?

Yes. You can deduct supplemental insurance premiums because it is a deductible for a medical expense under Schedule A of a 1040 federal tax form. You can deduct an amount that exceeds a certain percentage of your adjusted gross income.

What is supplemental long-term disability insurance?

Supplemental long-term disability insurance is a type of supplemental insurance policy that helps to pay a monthly benefit in the event of an illness or injury. This benefit is used to replace a portion of your income which can help you meet your financial needs in a time of medical need.

What is supplemental group life insurance?

Supplemental group life insurance is the amount of supplemental life insurance that is available to you as an employee at no cost to you. This is not a policy that is always offered depending on where you work.

Does Aetna supplemental insurance cover silver sneakers?

Most Aetna supplemental insurance plans already include silver sneakers, giving customers access to over 13, 000 gyms and fitness locations across the United States today. If you are unsure if your policy offers this benefit, check your policy for more details.

Can you get supplemental health insurance through Obamacare?

No. Obamacare is used to supply Americans with traditional medical insurance. You can get supplemental health insurance by contacting supplemental insurance providers directly. The providers that you can find in the medical insurance marketplace do not provide minimum essential coverage as regulated under Obamacare.

Does AARP supplemental insurance cover home health care?

Depending on the necessity and need of home health care, AARP supplemental insurance may cover home health care but in a limited capacity. Most of the policies offer do not cover assisted living or adult day care. Most home care is done on a temporary basis.

Supplemental Liability Insurance FAQs

In this section you will find frequently asked questions about supplemental liability insurance, so you can rent a car with ease.

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What is supplemental liability insurance for a car rental?

Supplemental liability insurance for car rentals is a type of insurance that is designed to cover claims associated with an accident that is made in a rental car. This type of insurance is typically required by most states.

Do I need supplemental liability insurance?

Yes. In order to rent a car or truck in most US states, you will have to buy supplemental insurance. Since it is used to cover costs in a potential accident if you cause it, it is a great way to keep you and the car rental facility protected.

Do I need supplemental liability insurance for a car rental?

Yes. Most car rental places across the United States will require you to purchase supplemental liability insurance in the case you may get into an accident and if you are the cause of said accident.

Medicare Supplemental Insurance FAQs

This section answers frequently asked questions pertaining to only Medicare Supplemental Insurance.

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What is the best Medicare supplemental insurance plan?

The best Medicare supplemental insurance plan is Cigna. Cigna is a supplemental insurance provider that works with any Medicare provider, offers some international coverage and guarantees renewal except if consumers do not pay.

How much is Medicare supplemental insurance?

The price range for Medicare supplemental insurance varies based on the type of insurance you receive. Some plans can start as low as $68 a month and go as high as $450 a month.

What is Medicare supplemental insurance?

Medicare supplemental insurance, which is also known as Medigap, is an insurance policy that can help pay for some of the health care costs associated with aging. The only costs this insurance does not cover are copayments.

Do I need Medicare supplemental insurance?

To be honest, it depends. Remember, Medicare supplemental insurance is used to cover services from health care providers that you would normally have to pay if you didn’t have a supplemental insurance policy.

What percent of Medicare patients have supplemental insurance?

As of 2015, there are almost 12 million people with Medicare, with nearly 9 million of those customers having supplemental insurance. Of course, this number is expected to steadily climb every year.

Do you have to have supplemental insurance with Medicare?

No. It is your choice to include supplemental insurance with your Medicare policy. However, keep in mind that supplemental insurance helps to cover additional medical costs that Medicare won’t cover.

What is the average cost of supplemental insurance for Medicare?

The average cost of supplemental insurance for Medicare varies based on different factors:

  • Community rating-the price of the premium is dictated by everyone who purchases a supplement insurance plan.
  • Age Rating-The premium you pay is based on your age when you purchase the policy.
  • Attained Age Rating-This premium is based on your current age.

What is the best supplemental insurance for Medicare?

There is no best supplemental insurance for Medicare plan for everyone. In order to choose the best insurance, you must find a plan that works for your needs and consider what types of benefits each plan offers.

Is Medicare supplemental insurance worth it?

Of course, Medicare supplemental insurance is worth it. The gaps of coverage in Medicare is substantial, so you want to have supplemental insurance in place to help you keep every base covered.

How much Medicare supplemental insurance do I need?

This ultimately depends on what your needs are and what gaps of Medicare coverage you currently have. Once you consider those, you can find Medicare supplemental insurance policies that cover these gaps.

When can I apply for Medicare supplemental insurance?

You can apply for Medicare supplemental insurance on the first day of the month that you turn 65 or if you are older. You must also be currently enrolled in a Medicare Part B policy.

Is Medigap the same as supplemental insurance?

Medigap and supplemental insurance are one in the same. These types of plans are offered through private companies and are specifically designed to help cover for out of pocket costs of services covered under both Medicare Part A and Part B.

Who sells Medicare supplement insurance?

Medicare supplemental insurance plans are typically offered by private insurance companies such as Cigna, AARP, Mutual of Omaha Insurance. However, before trying an insurance policy from one of these companies, search around to see from whom you will get the best rates.

What is Medigap supplemental insurance?

A Medigap supplemental insurance is a special insurance policy that can help pay for certain health care costs that Medicare doesn’t cover such as copayments, deductibles, coinsurance and costs of medical care whenever you travel outside of the United States.

What is the best supplemental insurance to go with Medicare?

The best supplemental insurance to go with Medicare is a supplemental insurance policy through Cigna. It is the leading Medicare supplemental insurance company today and they work with any Medicare provider.

Can you apply for Medicare supplemental insurance?

Yes. You can apply for Medicare supplemental insurance. However, you can only sign up for Medicare supplemental insurance during the open enrollment period. After the enrollment period, you could be denied for coverage.

Who is eligible for Medicare supplemental insurance?

Those who are eligible for Medicare supplemental insurance are those that are already enrolled in Medicare, citizens of the United States, those over the age of 65 or older and those who have been legal residents for at least 5 years.

Can you be denied Medicare supplemental insurance?

Yes. Because private insurers that offer supplemental insurance plans can turn down applications due to disabilities or pre-existing conditions if customers fail to sign up during the open enrollment period.

Are Medicare supplemental insurance premiums deductible?

Yes. You can deduct Medicare supplemental insurance premiums on taxes as long as the medical expenses don’t exceed 7.5% of your adjusted gross income. You can only deduct Medicare premiums and medical expenses.

Is Medicare Part B supplemental insurance?

No. Medicare Part B is a type of medical insurance. Part B covers necessary medical services and supplies which can include doctor visits, preventative care including tests and necessary medical equipment.

Can you change your Medicare supplement insurance?

Yes. In order to change Medicare supplement insurance, you must go through medical underwriting. Doing so allows you to change your supplement plans any time of the year. Be sure to check your policy first before attempting to change your plan.

Supplemental Insurance Coverage FAQs

This section covers every aspect of supplemental insurance coverage such as what a supplement plan will cover.

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Can you be turned down for Medicare supplemental insurance?

You can be turned down for Medicare supplemental insurance if you are not enrolled in Medicare Part A or Medicare Part B. You can also be turned down if you don’t apply for Medicare supplemental insurance during the open enrollment period.

What types of coverage does supplemental health insurance have?

Supplemental health insurance isn’t a specific type of insurance that is used to cover medical costs. Instead it is used to cover certain medical expenses such as co-payments, deductibles and coinsurance costs that your regular health insurance won’t cover.

Does Medicare Supplemental Insurance cover hearing aids?

As a general rule, most Medicare supplement providers won’t cover hearing aids, hearing exams or fittings for hearing aids. You will need to have a separate medical insurance that is willing to pay 100% of the cost of your hearing aids.

What does Aflac supplemental insurance cover?

Aflac supplemental insurance covers minor and major accidents, hospital stays, cancer, critical illness, vision and dental and disabilities. Aflac tends to offer cash payments in such incidents and the amount varies based on the out-of-pocket cost for each.

Jordan Beaumont

Jordan Beaumont

Financial Guru

Jordan's work focuses on helping people reach their financial goals so they can spend more time with family and friends and less time worrying about their budget. After finishing college with a degree in Accounting and Communication, he realized that these are the most important things in life and that people shouldn’t miss out because of money.

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