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The Rise of Supplemental Health Insurance

Business professionals reviewing supplemental health policy

Quick look: Supplemental health plans are becoming a hot commodity – 70% of businesses believe the plans help them recruit talent, and 60% of workers want their employers to offer them. Here’s why supplemental coverage is becoming so popular and how working with a professional employer organization (PEO) can help brokers meet the rising demand.

It’s likely a challenging time for many of your small- and medium-sized business (SMB) clients. Inflation is the highest it’s been since 1981, and it’s become increasingly difficult for your clients to hire and keep the talent they need to keep growing their business.

Brokers are in a unique position to solve these pain points by encouraging clients to offer benefits that their competitors may not be. Supplemental health insurance is one of these benefits, and can strengthen the finances of both your clients and their staff, improve employee attraction and retention rates, and reinforce your book of business.

What is supplemental health insurance?

Supplemental health plans can include a variety of offerings, but typically refers to three main policy types:

  • Accident insurance: Pays cash benefits to your client’s employees if they are injured in a covered accident.
  • Critical illness insurance: Pays cash benefits if a client’s employee or a covered dependent is diagnosed with a covered condition.
  • Hospital indemnity insurance: Pays cash benefits to your client’s employee if they or a covered dependent is hospitalized due to illness or injury.

These coverages are considered voluntary benefits, meaning your clients offer the products, but their employees are responsible for the cost of the premiums after they opt into the policy.

Rising costs, rising need for supplemental health policies

Inflation is at a 40-year high, and both clients and their staff are feeling the strain. Unfortunately, health insurance costs are rising even faster. The average amount that families pay for their health coverage premiums has increased 55% since 2010, compared to a 27% growth in wages.

This financial burden has put clients in a difficult situation. Partnering with a professional employer organization (PEO) is a great option for clients looking to mitigate costs without sacrificing the quality of their health coverage. PEOs enable smaller employers to offer Fortune 500-level benefit plans at rates they wouldn’t be able to achieve on their own.

This predicament has led many employers to provide high-deductible health plans (HDHPs) to their employees, which feature more affordable premiums in exchange for a high deductible (in 2022, the minimum deductible is $1,400 for individuals and $2,800 for families). HDHPs are popular – in 2020, 34% of employers offered them compared to just 26% in 2018 – but they can unintentionally put employees under additional financial stress.

This is where supplemental health insurance can make a great impact. By offering supplemental plans, your clients can offset some of their employees’ health costs without shouldering the entire amount themselves.

For example, an employee who has an HDHP could drain their savings if they require a long hospital stay. However, if they have supplemental hospital indemnity coverage, most or all of these costs would be covered. Accident and critical illness coverages can safeguard employees in the same way, as well.

Benefits beyond beefing up an HDHP

A major advantage of supplemental health insurance is that it can fill coverage gaps caused by HDHPs – but that’s not the only benefit it provides. Here are two other ways it can help both clients and their employees.

1. Boost financial, mental, and physical wellness

Financial, mental, and physical hardships can spark a self-perpetuating cycle of stress. For example, if someone is worried about their finances, they may experience emotional stress, which can cause physical ailments, which can create more financial stress, and so on. Research has shown that:

Supplemental health plans can break this cycle and enable your client’s employees to strengthen their holistic wellbeing by assisting with medical bills that surpass their health insurance’s coverage, or by providing cash to help employees pay for a covered event even if they haven’t hit their medical plan’s deductible.

And in a world that prioritizes personalization, supplemental plans can enable your client’s staff to spend their money in the ways that make the most sense for them. For example, families with children may opt into accident insurance coverage to receive extra protection against injuries, while a Baby Boomer may opt into critical illness insurance or a cancer prevention and management plan to protect themselves against the costs associated with cancer, heart attacks, strokes, and more.

2. Differentiate clients in a tough labor market

It’s become increasingly difficult for clients to attract and retain workers – but supplemental health plans can foster loyalty that can allow their organizations to flourish. According to a recent Aflac report, 70% of employers feel supplemental plans help them recruit talent, and 60% of workers want their employers to offer these plans to them.

Why the high demand? There are two main reasons supplemental health policies have become a key selling point for clients:

  • Aftereffects from the pandemic: The Aflac report mentioned above states that 90% of employees believe the need for supplemental coverage has increased since the COVID-19 pandemic began. Additionally, 43% of Americans claim that the virus caused them to focus on their health more than they did in the past.

  • It’s an employee’s market: A large portion of the workforce is experiencing more power and flexibility than ever before, and this has encouraged them to demand benefits that complement their specific needs. For example, 86% of workers say it’s extremely, very, or moderately important that their employer provides them with personalized benefits. Supplemental health plans can fit this bill by allowing your client’s employees to choose the particular coverage they need while still enjoying the lower premiums they may be experiencing with a HDHP.

Trusted solutions from a trusted source

While many large companies already offer supplemental health coverage, it can be more expensive and cumbersome for SMBs to provide these plans to their employees. That’s where brokers, with the help of a PEO, come in.

A PEO, like ExtensisHR, has a broker-centric business model designed to help you succeed, as well as a team of employee benefits experts that can assist your SMB clients with administering and managing a Fortune 500-level benefit offering including the following supplemental health plans:

  • Critical illness insurance
  • Accident insurance
  • Hospital indemnity insurance
  • Cancer prevention and management program coverage
  • And more

Supplemental health coverage can bolster your client’s benefits package and future-proof your book of business. Contact the employee benefits experts at ExtensisHR today to learn more.

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