What Is a Major Medical GAP Plan?

Health insurance premiums continue to be one of the largest expenses for many businesses. In response, an increasing number of employers have moved to higher-deductible health plans as a way to manage premium costs. While this approach can reduce the monthly premium expense, it may create a challenge for employees who face higher out-of-pocket costs when they need medical care.

This is where a Major Medical GAP plan may help.

What Is a GAP Plan?

A GAP plan is a supplemental insurance product designed to work alongside a major medical health insurance plan. It may help cover expenses that fall within the health plan's deductible and out-of-pocket maximum.

When an employee receives covered medical services, the GAP plan may reimburse a portion of the deductible or coinsurance costs — depending on the specific plan design. This can help reduce the employee's out-of-pocket burden when they use their health insurance.

How Does It Work in Practice?

Here's a simplified example of how a GAP plan might work:

A business currently offers a health plan with a $2,000 deductible and pays $1,200 per month in premiums per employee. The business explores moving to a plan with a $5,000 deductible, which reduces the premium to $800 per month per employee. The business then adds a GAP plan that may help cover a portion of the $5,000 deductible, for an additional cost that is typically less than the premium savings.

In this scenario, the business may manage its overall premium expenditure while still providing meaningful coverage to employees through the combination of the major medical plan and the GAP plan.

What Does a GAP Plan Typically Cover?

Coverage varies by carrier and plan design, but common covered expenses may include:

• Deductible expenses: Reimbursement for costs applied to the major medical deductible
• Coinsurance expenses: Help with the employee's share of costs after the deductible is met
• Out-of-pocket maximum expenses: Coverage up to the plan's maximum out-of-pocket limit
• First-dollar benefits: Some plans include benefits that are paid regardless of whether the deductible has been met

Who May Benefit from a GAP Plan?

A GAP plan may be worth reviewing if:

• Your business offers a high-deductible health plan
• Employees have expressed concerns about out-of-pocket costs
• You are looking for ways to manage premium expenses
• You want to maintain a competitive benefits package
• You are considering switching to a higher-deductible health plan

Important Considerations

GAP plans are not major medical insurance and do not replace a primary health plan. They are supplemental products designed to work in coordination with an existing health insurance plan. Coverage details, costs, and availability vary by carrier and state.

Taking the Next Step

If you are interested in exploring whether a GAP strategy might work with your current health plan design, a complimentary 15-minute review can help you understand your options. There is no cost and no obligation.