Which clients are good fits for supplemental health products?

With shrinking benefits and rising premiums in nearly every line, health insurance agents are faced with a key problem: How do I provide better protection for my clients? 

The answer lies in ancillary, or supplemental health, products. 

Yes, these products require some additional premium dollars up front -- and that's a tough ask in a tightening economy -- but the proper matching of benefits to your clients' current coverage and risk profile can save them from massive out-of-pocket expenses. And, in the right cases, it can make them a little extra to help pay for their care and household needs as they recover from a serious injury or accident.

We'll run through some of the more popular plan types we offer, who their ideal audience is, and present a few outside-the-box applications, too.

Hospital indemnity insurance policies

What it is: Pays a specified lump-sum amount, generally on a per-day basis, when a client is hospitalized.

Who it's primarily for: These policies were built to offset inpatient hospital copays on Medicare Advantage plans. 

How much should it be written for: Generally, a dollar-and-day match to the Medicare Advantage plan is sufficient.

Who else could be a good fit?  These policies (and riders -- think outpatient surgery, ambulance, and outpatient physical/occupational/speech) therapy can help offset the deductible on a High-Deductible Plan G. 

Clients enrolling in ACA alternatives without sufficient hospital coverage might also be interested. In this case, you'd want to structure the policy to at least cover their out-of-pocket maximum -- and probably more.

Critical illness (and cancer) insurance policies

What it is: Pays a specified lump sum upon diagnosis of named diseases, such as heart attack, stroke, or cancer.

Who it's primarily for: Although they can be sold to nearly anyone in their issue-age range, it's better to buy in early. Generally, these are good fits for clients on higher-deductible individual or employer group plans.

How much should it be written for: Conservatively, aim for at least the plan's out-of-pocket maximum. However, twice the out-of-pocket amount can work well for clients who can afford it.

A late plan-year diagnosis could run up medical bills pretty quickly as is. And when the plan year rolls over? Your clients might face their deductible and OOPM for any necessary follow-up care.

Who else could be a good fit?  Medicare enrollees could also see a benefit here, if they can afford the premium when they buy in. While their primary plan should cover most health-related costs, the lump sum payment from these policies can help replace income, pay for household help and groceries, and other expenses.

Clients enrolling in ACA alternatives can also be a good fit here. Plans might exclude high-dollar claims or specific conditions entirely. A critical illness benefit can provide some bankruptcy protection should something occur.

Accident insurance policies

What it is: When a specified accident occurs, it pays out a lump sum from a benefit bank, or for a defined amount per injury.

Who it's primarily for: Your clients most at-risk for accidental injury are a natural fit. Consider families with children in youth sports or very active adults. Note that some things are often excluded: Injury while playing a semi-pro (or pro) sport would likely need to be covered under a different policy. 

How much should it be written for: Generally, we'd recommend writing to at least match the out-of-pocket limit on an employer group or individual plan. You might consider writing for double the limit, as you would with a critical illness policy, but accident policies can be more expensive. And, while every injury is different, it's more likely that the injury treatment will not require extensive follow-up care.

Who else could be a good fit? There's another natural opportunity to sell these plans to those choosing ACA alternatives. Many of those plans have gaps that supplemental benefits can fill.

More tips and tricks for stacking supplemental health insurance

First things first: you no doubt noticed that we recommend presenting these products to clients in ACA alternatives. Your client likely chose that plan to save on premiums -- but like everything in life, you get what you pay for.

Supplemental products can help fill the gaps in those alternative plans. One can reasonably stack enough supplemental policies to approximate (though not replace) a major medical plan -- and still see some premium savings. However,  buyer beware -- there are a lot of hurdles in submitting claims, tracking payouts, and potential tax implications when taking this route.

We also mentioned writing many of these policies to match or double the primary health plan's out-of-pocket max. While those are good rules, some rules are made to be bent. The savviest agents know deductibles and out-of-pocket maximums rarely decrease. And so, they may write these policies for 10% above the out-of-pocket max. That allows some wiggle room should the out-of-pocket maximum change, and cushions against having to go through underwriting if the policy gets re-written.

Finally, we should note that all of these policies can be sold to employer groups. Generally, these voluntary benefits come at no cost to the employer, with the employee paying the full premium. However, being able to offer these lines can help boost employee retention -- and retention in your overall book of business.

Better protection, better earning potential

Supplemental health products help protect your clients from their ever-growing out-of-pocket responsibility. Fortunately for you, first-year commissions are often north of 35%. That sounds like a true win-win for everyone.

Need help building your ancillary lines portfolio? We can do that. Get appointed.