How Gap Health Insurance Works

Gap health insurance coverage, also sometimes called supplemental health coverage, is a type of health insurance that pays for things not covered in your main health insurance plan. 

Sometimes, especially if you choose a high-deductible health plan, certain services, prescriptions, or doctor’s visits are not covered until you meet your deductible, which can be thousands of dollars. For a monthly premium, gap health insurance kicks in before your deductible to help you reduce your out-of-pocket expenses. Many people get gap health insurance to assist them with copayment costs and other bills if they suffer a medical emergency.

The Toll of Unexpected High Health Costs

These days, health insurance is unaffordable for many. Nearly 4 in 10 adults have delayed getting medical care in the previous year because they can’t afford it, and 44% of Americans with health insurance fear meeting their deductible before their health insurance coverage kicks in.

Nearly half of Americans have trouble affording health insurance in the first place, which is possibly why so many choose high-deductible health plans. These monthly premiums are usually cheaper than lower deductible plans, but you must pay more before coverage kicks in.

Gap insurance can help to alleviate some of these financial worries. While it doesn’t lower your deductible, it can offer some coverage before you reach it. 

How Medical Gap Insurance Works

Medical insurance is a supplemental health insurance plan. That means you need to have a main, primary health insurance plan for it to supplement. It fills in some of the gaps in coverage you may have until you hit your deductible, such as copayments for doctor’s visits, hospital stays, or laboratory testing.

Because gap health insurance isn’t a full health insurance plan, the Affordable Care Act (ACA) doesn’t mandate it. Enacted in 2010, the ACA expands access to healthcare coverage by preventing companies from discriminating against people for pre-existing health conditions. It also mandates a certain level of minimum coverage for essential health benefits. Supplemental insurance doesn’t have to follow these rules, meaning you may pay more if you have a health condition or want better coverage. The upside of this is that you can choose the specific level of coverage you want without paying extra for things already included in your primary plan.

When it’s time to use your supplemental health insurance benefits, they’re usually paid out to you in a lump sum payment. You’re then responsible for paying the provider with this money. This differs from traditional insurance, where the company pays providers directly.

	HDHP	Traditional Health Insurance
Major Medical Insurance	Yes	Yes
ACA Compliant	Yes	Yes
Premium	Low premium	Average to high premium
Deductible	High deductible	Average to low deductible
Copay	Yes	Yes
Coinsurance	Yes	Yes
HSA Eligible	Yes	No

Eligibility

• Age Requirement: Typically, individuals within a certain age range may be eligible for gap health insurance. This can vary, but policies often cover individuals between 18 and 64 years old.
• Health Status: Some gap insurance plans may require individuals to be in good health or may exclude pre-existing conditions. The eligibility criteria related to health can vary among different plans.
• Primary Health Insurance: Gap insurance is designed to supplement primary health insurance, so individuals may need to have an existing major medical insurance plan in place to be eligible for gap coverage.
• Citizenship or Residency: Some policies may have requirements related to citizenship or residency status. Individuals may need to be citizens or legal residents of the country where the insurance is offered.
• Employment Status: Certain gap insurance plans may be tied to employment, and eligibility may be contingent on being actively employed. This can include situations where an employer offers gap insurance as part of a benefits package.
• Waiting Periods: Some policies may have waiting periods before coverage begins. This means individuals may need to wait a certain amount of time after purchasing the policy before they can start using the benefits.
• Coverage Limits: Eligibility may also be determined by coverage limits. Individuals may need to have a primary health insurance plan with specific coverage limits in order to qualify for gap insurance.
• Enrollment Periods: Gap insurance may have specific enrollment periods, and individuals may need to apply for coverage during these designated times to be eligible.

What Does Gap Health Insurance Cover?

Every gap health insurance plan coverage is different, so check with a few providers to see which ones have the type of coverage you need. Generally, gap health insurance covers a range of medical expenses, including copays or coinsurance you pay before you meet your deductible. Some plans are specifically for catastrophic events, so they cover you if you’re in a serious accident. With these plans, you can sometimes even use your lump sum payment to pay for living expenses as you recover.

Here’s a close look at what is — and isn’t — covered by medical gap insurance.

Main Plan’s Deductible

Your main plan’s deductible is the amount you must pay in medical expenses until your coverage kicks in. Gap health insurance typically pays for these uncovered bills for you and, therefore, helps you meet your deductible faster. Remember, gap health insurance doesn’t pay your deductible full out — it only pays for eligible expenses that contribute to your deductible.

Main Plan’s Copays

Your primary insurance plan often charges you copays for services before you hit your deductible. For example, you might pay $70 for a specialist doctor visit. Supplemental health insurance sometimes foots the bills for these types of copays.

Main Plan’s Coinsurance

Coinsurance is different than a copay. Rather than a set amount for a specific service, it’s a set percentage of the cost of a service. For example, 50% coinsurance for emergency room visits is common. This means you pay 50% of your bill, and supplemental health insurance covers this.

Accidents and Death

If you’re in a serious accident that results in many medical bills, gap health insurance can help reduce the burden of paying for your recovery. And if you’re killed, it might pay the gap for your primary coverage to kick in so that the burden doesn’t fall on your family members.

Prescription Drugs

Some gap health insurance plans cover prescription drugs, but not many. It may depend on the type of drug, your diagnosis, and whether or not your primary plan covers them after you meet your deductible. If you think you need this coverage, seek out a plan that specifically offers it.

What Does Gap Health Insurance Not Cover?

Gap insurance commonly does not cover items covered by the ACA, such as mental health treatment or vaccinations. Your primary insurance usually covers these in full.

It also can’t help you pay your health insurance’s monthly premiums. You need to pay these out of pocket every month on your own.

Finally, supplemental health plans are legally allowed to discriminate against policyholders, so you may find certain plans with specific stipulations. For example, some plans don’t cover medical care resulting from being under the influence. Others may not pay for medical care for pre-existing conditions.

Gap Insurance and High-deductible Health Plans (HDHP)?

An HDHP has a minimum annual deductible of $1,600 for individuals and a maximum out-of-pocket expense limit of $8,050. The amounts go up to $3,200 and $16,100 for family coverage.

People mainly consider these high-deductible plans because they’re less expensive every month. Premiums are generally more affordable than lower-deductible plans, meaning you save money upfront. However, if you have a medical issue, you must pay more before your coverage kicks in than you would with a traditional plan.

Gap insurance is a way to alleviate these sudden medical costs. While it does add to your monthly premium, it offers more protection than an HDHP alone.

How Much Does Gap Health Insurance Cost?

Gap health insurance premiums can vary widely, but on average, expect to pay around $30 to $220 monthly.

Remember: gap plans aren’t governed by the ACA, so insurance companies can factor in your age and pre-existing conditions when calculating your rate. Several other factors can affect how much you pay in gap health insurance monthly premiums, such as:

• The amount of coverage you’re looking for
• Where you live
• Gender
• Whether you smoke or not
• Whether you drink or not

To find reasonable rates, get quotes from a few different companies and see how they compare.

Should You Get Gap Health Insurance?

Getting gap health insurance is a personal decision that depends on how likely you are to use the plan’s benefits. Consider how often you see the doctor, as well as how much you have in savings to cover a medical emergency. For example, if your deductible is higher than what you have saved, a medical supplement plan might help you afford coverage when needed.

Benefits

The benefits of gap health insurance include:

• Lower healthcare costs: The primary benefit of gap health insurance is that it can lower your healthcare costs. You get the low-cost benefits of an HDHP without paying the deductible before receiving coverage.
• Helps cover emergency expenses: Even if you’re healthy now, a sudden diagnosis or accident could result in you needing to pay your full deductible right away. Gap health insurance lessens this burden.
• Reduces reliance on a health savings account (HSA): HSAs are a way to save up tax-free money for your medical expenses. But contributing to these can take away part of your income.

Drawbacks

Gap health insurance also has downsides, including:

• Gap health insurance costs money: In some cases, it may be more affordable to choose a lower deductible primary health plan and pay a higher monthly premium.
• Gap health insurance providers can refuse coverage — or charge you more: Gap insurance isn’t regulated by the ACA, so providers can deny you coverage or increase your fees if you have a pre-existing condition or are older.
• May come with its own deductibles and copays: Gap health insurance plans sometimes have additional fees you must pay before coverage kicks in. These may be cheaper than what your primary insurance charges, but they’re still out-of-pocket costs.

How to Get Medical Gap Insurance Coverage

Acquiring medical gap insurance coverage is a relatively simple process. Once you find a provider you like — or learn that your employer offers a plan — you give them your personal information. They then provide you with a personalized quote. Your benefits then kick in at some point after you pay your first premium.

1. Check with your employer for a gap insurance option

If your employer offers an HDHP, they may also offer a supplemental plan to go with it. These plans are meant to complement the primary coverage you’re offered. Ask your employer or their benefits coordinator about your options. Chances are, if they offer a plan, there may be a few options to choose from regarding coverage. Your employer may also help with part of your premium.

2. Find a stand-alone plan or one with your current health insurer

If your employer doesn’t offer a plan, then your next step is to find a stand-alone one. First, check with your current health insurer, as they may have plans intended to complement their specific primary coverage. These are usually more convenient, as you can pay your premiums simultaneously, and there’s no negotiating with two competing companies. Otherwise, you can search for supplemental health insurance plans from various providers.

3. Select the plan that is best for your needs 

Thoroughly compare each plan you’ve found. Chances are, they have slightly different coverages and payment limits. For example, some plans have a lifetime benefit maximum, meaning they don’t pay out more than that amount. Others might be too expensive for what you’re getting, charge high copays for services, or have a small provider network. So, compare more than the monthly premium to understand which plan is ideal for you.

4. Apply and receive confirmation of benefits

Many gap health insurance plans ask for personal information during the quote process, but you must provide this again when applying. Companies typically ask for the following:

• Name
• Address
• Date of birth
• Health history or physical screening document from your doctor
• Social Security number
• Current insurance policy info
• Proof of identity, like a copy of your ID or birth certificate

After your application is approved, the company usually sends you an ID in a few days or weeks.

Filing a Claim With Your Gap Insurance

Generally, you can log in to your provider’s website to file a claim. Many have an online claim form that lets you submit documentation online. It might ask you to fill out a form explaining the details of the claim, such as what the medical bill is for, how much it is for, and when the services were rendered.

To ensure these details are accurate, it may also ask you to upload any bills or explanation of benefit forms you received. Companies usually want these bills to be itemized so they can see the total breakdown of fees. In particular, they look for your diagnosis or ICD-9 code for each claim. Once you submit this info, it may take a few days or weeks to hear back from the insurance company.

Alternatives to Consider

If gap health insurance doesn’t sound like the right fit for you, you can save on healthcare costs in other ways. Health savings accounts and a secondary health insurance plan are two options to consider.

Health Savings Account (HSA)

An HSA is a savings account where you can set aside money before taxes to pay your medical bills. In 2022, you could contribute up to $3,650 for individual coverage and up to $7,300 for family coverage. You can use this untaxed money to pay for any of your qualified medical bills, no strings attached. That’s why some prefer it over gap insurance — you don’t have to get approvals from your insurance company, and you also don’t have to pay a monthly premium.

Secondary Health Insurance Plan

Sometimes, getting a second health insurance plan that covers things your primary insurance plan does not make sense. However, this can get expensive, as you have to pay the premiums for two full-coverage plans. You also have to coordinate benefits between the plans, as providers don’t allow duplicate expenses. In particular, this can be a suitable option for young adults who have coverage both through their parents and an employer or for adults who have Medicaid and need a little more coverage.

Putting It All Together

Now that you know more about gap health insurance plans, you can decide if enrolling in one makes sense for you. They can be a good way to supplement the gaps in your primary coverage until you reach your deductible. And since they typically cover costs like copays and coinsurance, they can save you a lot of money, even with their monthly premium.

If you’re interested in pursuing a gap health insurance plan, compare quotes between providers until you find a good option. Also, see how changing your levels of coverage changes your monthly premium.