When someone is in between jobs or health insurance plans, it's best to remain insured just in case the need for care arises. However, choosing a traditional health insurance plan is not always possible in some circumstances. This is where gap health insurance and short term health insurance plans come into play. In an increasingly popular gig economy, it is beneficial to be aware of whether a gap health insurance plan is right for you and when it is most useful.

What is gap health insurance?

A gap health insurance plan is a group supplemental health insurance that works along with a high-deductible major medical plan. Because of this, you may hear this kind of insurance be referred to as supplemental health coverage. According to the IRS, a high-deductible health plan (HDHP) is “any plan with a deductible of at least $1,400 for an individual or $2,800 for a family.” Gap insurance is helpful for someone who may have high medical costs before they have reached the deductible on their primary insurance or for someone who is in between jobs.

A medical gap plan pays the amount that would have otherwise been applied to the insured's main deductible. More people than ever are looking for gap insurance to cover out-of-pocket medical fees, but there are certain populations that would benefit more than others with this type of coverage. When you have a high deductible and many medical costs, it may be worth it to consider a gap health insurance plan. Here are some similar types of health insurance for those who need supplemental insurance that should not be confused with gap insurance:

• Short-term health insurance (STM): used when you have a temporary insurance coverage gap. This is a kind of gap insurance that operates when there is no main coverage plan.
• Guaranteed asset protection (GAP) coverage: a standard policy pays the current market value of the vehicle at the time of a claim

A medical gap insurance plan usually operates in a way that follows an employer's major medical plan. A gap plan pays the benefits described in the Schedule of Benefits up to a maximum benefit amount.

Who needs gap health insurance?

According to the Commonwealth Fund, 21.3% of American adults were underinsured last year. In addition, they found that 9.5% of people experienced a gap in coverage during 2020. As more data is being collected in the wake of one of the largest public health crises in the past decade, it is becoming clear that gap insurance is more popular.

If the beneficiary has many health concerns that lead to high deductibles, copays or coinsurance. This is especially useful if your main health care plan does not cover the types of health services you require. When the cost of insurance is high, access to healthcare declines immensely. In fact, according to the Kaiser Family Foundation, “73.7% of uninsured adults said that they were uninsured because the cost of coverage was too high.”

Even for those who have decent jobs with health insurance coverage, the deductible is often still more than they can afford to pay for treatments, and they need help meeting that staggering deductible. In addition, the cost of insurance is increasing as well. According to CNBC, deductibles have increased “68.4% since 2011, to an average of $1,669 from $991.”

What is covered by gap health insurance?

Keep in mind that gap health insurance is not major medical insurance. Because of this, there are very limited benefits, which is why it is best used in tandem with a major plan. Some people refer to gap insurance as “insurance for your insurance” because of this, but some beneficiaries use STM in the case that they have no insurance at all. Before venturing in, it is important to know what is covered in your state.

To learn more about what is applicable in your unique situation or the circumstances of your client, be sure to check out healthinsurance.org's extremely helpful map of short-term health coverage insurance rules and regulations in your state.

How to best work with those who have temporary health insurance?

As the third-party facilitator, you should be ready to work with those who have experienced a gap in their healthcare coverage or need supplemental coverage. There is a distinct difference between the Affordable Care Act (ACA) plan and short-term minimum essential coverage. ACA is more comprehensive but is not always accessible for those who have an HDHP. It is also important to note that short-term health plans can be purchased outside of the Open Enrollment Period for just under a year (364 days).

Communication is key for those who find themselves in between health care insurance plans or have astronomical deductibles. Often, these people can feel overwhelmed and unsure of how to proceed. By understanding the different systems, you can act as a stress reliever for those who need it the most. Contact a Lewis & Ellis consultant today to learn more.