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"Who Pays For it?" and Other Common Supplemental Insurance Questions

From driving profits and creating happy customers to just keeping the lights on, employers have a lot to think about these days. Researching supplemental insurance is not among those top priorities, which can prevent their employees from accessing these valuable coverage options.

Here are some basic questions employers may have when considering supplemental insurance coverage for their employees.

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What is the difference between health insurance and supplemental insurance?

Health insurance covers medical expenses, which may include doctor's office visits, testing, prescriptions and ER care, just to name a few. The insured customer pays a premium to the carrier either directly or through an employer, and coverage can apply to the employee and eligible family members.

Supplemental (or voluntary) insurance helps to cover out-of-pocket medical expenses. These expenses include residual costs that fall to the customer, such as deductibles, copayments and coinsurance—expenses that are not covered by health insurance. Because supplemental insurance pays the customer directly (unlike health insurance, which pays providers directly), customers can use the benefit however they choose, including paying for bills or daily living expenses like groceries and child care.

Just like health insurance, premiums are paid to the carrier either directly or through an employer-sponsored program, and coverage can apply to the employee and eligible family members.

Supplemental insurance products are designed to cover critical illnesses, accidents, hospital stays, cancer diagnoses, and short-term disabilities, and can also include dental insurance, vision insurance and others. Employers may also offer supplemental life insurance, which provides benefits to pay for final expenses like funeral costs and fees required to settle an insured's estate.

How does supplemental insurance work?

Let's say your company offers supplemental accident insurance to employees. An employee named Tom signs up. A year later, Tom has a skiing accident and breaks his leg in three places, putting him in the hospital for two days. Tom's health insurance will cover most of the costs, but it carries a deductible of $1,500 and a 30% coinsurance charge. Because Tom is off his feet for several weeks, he will also need to pay for a delivery service to buy groceries. Finally, a costly medication he needs is only partly covered by his health insurance.

After his health insurance pays a portion of expenses, Tom must pay out of pocket for his deductible, coinsurance, delivery service and medication, which easily grows to several thousand dollars in bills. Tom then submits an accident insurance claim and receives a cash benefit. His accident insurance benefit covers these expenses, possibly even with some left over for Tom to spend however he likes—for ski school, perhaps!*

Who pays for supplemental insurance?

Supplemental insurance is typically offered by employers and paid for by employees. While the employer "owns" the policy, employees enroll in policy coverage and own a coverage certificate. It is important to note that even though the policy is offered by the employer, all benefits are paid directly to the employee.

Because employees are receiving a group rate, they typically pay less for coverage than they would for an individual policy. Premium payments are usually automatically drafted via payroll deduction, allowing for a seamless payment experience for employees.

What are "wellness" benefits, and are they included with supplemental insurance?

Wellness benefits are designed to help employees stay healthy by providing a benefit for preventive care, including health screening tests, exams, imaging, vaccinations and other preventive services. This can also include health-focused programs designed to help employees quit smoking, lose weight, reduce stress or manage finances. Wellness benefits may also include gym discounts, mental health services, and employee resource groups.

At Allstate Benefits, several of our supplemental products offer employers the option to add wellness benefit riders to a base policy, which helps enrolled employees cover the costs of preventive care, health screenings, and more.

These products include Critical Illness Insurance, Accident Insurance, Hospital Indemnity Insurance, and Cancer Insurance.

Why should employers offer supplemental insurance?

When it comes to offering supplemental insurance, there are several key perks for employers. First and most importantly, supplemental benefits provide employees with peace of mind knowing that their finances are more secure in case of a serious illness or injury. This can help to cultivate a healthier company culture and more productive workforce.

Because insureds can use cash benefits however they like, including covering high deductible costs, they are a perfect complement to high-deductible health plans (HDHP).

Also, offering supplemental insurance helps employers stand out in a crowded job market—one where candidates are feeling the pinch of rising health care costs and are looking for employers to help. To counter these increases, many employers are now more likely to offer supplemental health benefits. Enrollment in products like critical illness insurance, accident insurance and hospital indemnity insurance are on the rise. According to BenefitsPro, the latter saw a 12% year-over-year increase in 2022 alone.1

Because they are employee-paid, supplemental benefits do not impact an employer's bottom line. Plus, supplemental benefits are compatible with most Health Savings Accounts.

Allstate Benefits makes it easy to offer coverage, relieving employers from time-consuming benefits management. Click here to learn more.

Do you have additional questions that are not answered above? Contact an Allstate Benefits agent today to get the answers you need!

12023 employee benefits & workplace predictions: This year's must-have benefits | BenefitsPRO
*This example illustrates Accident Insurance from Allstate Benefits. Accident insurance coverage may differ by carrier.

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