As employers explore ways to contain health care costs while complying with the PPACA, many also are looking to help their workers finance the higher co-pays, deductibles and premiums that can be a result of changes to their health care benefits.
In some instances, they are choosing what’s known as gap or bridge insurance. This covers some of the out-of-pocket health care costs that are increasingly difficult for employees to shoulder, including deductibles that can go as high as $10,000.
“Back in the 1990s, the cost of health care coverage was pretty manageable for most people. But starting about 1999, there’s been a steady increase in health insurance premiums,” said Stephen Parrish, marketing director for Crescent Medical Bridge, a Columbia, S.C., program manager for Companion Life, a subsidiary of Blue Cross/Blue Shield. “Employers have been struggling to find solutions. They can move to medical plans with higher out-of-pocket costs, and sure they save some money, but then they have some angry employees.”
Gap insurance, Parrish said, has helped alleviate the anger, and it looks as if the trend toward gap insurance purchases will continue post Patient Protection and Affordable Care Act implementation as HR officials and company executives consider cost and health benefit quality in their employee offerings.
Parrish said that looking ahead, his company is aiming to turn bronze health care plans, or the baseline tier under PPACA rules, into titanium plans, which exceed the PPACA top tier of platinum.
“Employees will be looking at zero out-of-pocket expenses,” he said.
Many gap insurance products are sold through the workplace as part of voluntary, pre-tax cafeteria plans, with employees financing the full cost. But employers can also pick up the tab, generally coupling it with lower-priced, high-deductible health care plans. Parrish said companies often find that it can be cheaper to switch to a high-deductible health care plan and pay for gap coverage than to pay for a lower deductible health care plan. As an example, he said he was meeting with potential clients in Birmingham this week that presently pay $450 a month for a single premium. He was showing them a plan that could cost $290 a month, plus a $70 per month gap plan for a monthly per-employee savings of $90.
Dick Chelten, president of the Beverly Hills, Mich.-based Chelten Benefits Group likens gap insurance to the Medicare strategy.
“Seniors get a basic benefit plan through Medicare and then are free to supplement their Medicare coverage with additional ‘Medigap’ insurance,” Chelten said. “Similarly, employer groups can use the same strategy for their workforce: offer low-cost, high-deductible plans plus supplemental gap insurance coverage.”
The typical gap plan is written for $3,500 or $5,000. Industry research shows that 86 percent of all health care claims total less than $5,000 per year, and so in theory, could be handled with most gap plans.