How Does Gap Health Insurance Work?


If you’ve noticed your healthcare costs rising lately, you’re far from alone. Prices have been skyrocketing for years, and many people are feeling the pain most acutely in the form of higher deductibles. With deductibles rising, people are paying more than ever – even for types of care that their insurance covers. 

If your deductibles are so high you can barely afford to pay your bills, it might be time to consider supplemental insurance. Gap health insurance is one type of plan that can fill the gap between your expectations of what insurance should cover and the crazy-high prices you’re paying for your care. In this overview, we’ll explain how gap health insurance works and how it can help you reduce your health-related spending.

What is gap health insurance?

Gap health insurance is a form of supplemental insurance that’s typically purchased in conjunction with a high-deductible health plan. The gap insurance covers care before you have met the deductible on your principal, high-deductible plan. You’ll have to pay a separate premium on the gap insurance plan, but the coverage you receive could still help you come out ahead in the end.  

Who needs gap health insurance?

Gap health insurance is intended for people with a high-deductible health plan. These individuals are forced to pay for most care themselves since it takes such a large outlay for coverage to kick in. The deductible is the amount you have to pay for care before the insurance company takes over and covers the bills. When your deductible is excessively high, you’re forced to pay for substantial amounts of your own care without getting any assistance from the insurance company. 

Gap plans are especially useful for people who regularly require health services that remain uncovered by their main, high deductible plan. Imagine, for example, that your deductible is $1,600, and you need occasional care that costs $250. You might never reach the deductible, so you’ll have to pay those expenses out of pocket. A gap insurance policy can help you cover those costs in exchange for paying a monthly premium.

What does gap health insurance cover?

It’s important to remember that gap insurance policies are meant to be supplementary, not principal, insurance plans – and that’s why they don’t cover many forms of medical care. While the specific benefits provided will depend on the policy in question, most plans will focus on critical illnesses and accidents with limited or no benefits for other types of care. That’s why it’s best to purchase gap insurance alongside a major health insurance plan that offers more comprehensive coverage. 

Is gap health insurance worth the money?

Whether or not gap health insurance is worth it will depend on your specific circumstances. If your current plan already has a relatively low deductible, then there’s no real need for a gap insurance plan. If you don’t expect to incur substantial healthcare costs in the coming months, then you might not need to worry about an additional plan. After all, you’d only be paying another monthly premium while getting nothing in return. 

The people who should be most interested in gap insurance are those with a high deductible plan and who worry about potential upcoming expenses. According to the IRS, a plan is considered a “high deductible health plan” if the deductible is over $1,400 for an individual plan and $2,800 for a family plan. If your plan falls into the high-deductible category and you’re worried you’ll be stuck with crushing medical bills, then a gap insurance plan might provide a solution. 

How much does gap health insurance cost?

The cost of gap health insurance depends upon four key factors:

a.) Chosen Plan Benefits: You’ll have to pay more for plans that offer a wider range of benefits and cover more of your total healthcare costs. 

b.) Age: Older people usually have to pay more for gap health insurance, the idea being that aging produces a higher probability of requiring medical services.

c.) Health Status: Unlike ACA-compliant plans, supplemental insurance providers can take existing medical conditions into account when determining a plan’s cost. 

d.) Location: Insurance costs vary by region as places with higher costs of living generally produce higher costs for medical care. 

When it comes to health insurance, everyone has their own set of needs and expectations. Ultimately, you’ll have to look long and hard at your unique circumstances before deciding whether a gap insurance plan is right for you.

About the Author: Ben Clabault is a freelance writer from Sandwich, Massachusetts. He has spent much of his adult life traveling through Latin America. He currently lives with his fiance in Santiago Atitlan, Guatemala. His areas of expertise include travel, marketing, SaaS, and global cultures. You can find his work on Copyfolio and reach out to him on LinkedIn.

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