Not to be confused with the short coverage gap exemption under the Affordable Care Act (ACA), or Obamacare, which allows for less than three consecutive months without coverage in a year sans penalty – gap health insurance is designed to account for gaps in your health insurance coverage. If you find yourself paying for a lot of out-of-pocket medical expenses, despite the fact that you have a primary health insurance plan that is compliant with ACA regulations regarding mandatory minimum essential coverage, you might be interested in filling the gap with a supplemental insurance policy. This is where gap health insurance comes into play.
It’s important to note that gap health insurance, like other supplemental policies (short-term or temporary health insurance, for example), does not meet the standards for minimum essential coverage. You cannot rely on this type of policy alone to remain in compliance with ACA standards and avoid penalties. That said, gap insurance could be extremely useful in a supplemental capacity. Why would you want it, though, if you already have a compliant, primary health insurance policy in place?
The insurance policy you choose through an employer-sponsored plan, the healthcare marketplace, or a private insurance provider will determine what you are expected to pay out-of-pocket for healthcare. Costs will include insurance premiums and deductibles, but your plan may also include co-pays or coinsurance. In addition, there may be healthcare services that aren’t covered by your policy, or you might have maximum payout amounts for certain benefits (deemed non-essential), after which you are responsible for some or all of your medical expenses. It is for such costs that gap health insurance was created.
Is it worth paying for a second health insurance policy to account for out-of-pocket medical expenses not covered by your primary insurance plan? This will depend largely on your particular situation. If you suffer extensive and/or ongoing medical needs and your out-of-pocket costs are exceptionally high, it’s likely that adding a relatively low-cost gap insurance policy to your existing health insurance plan is worth your while. If, on the other hand, you’re relatively healthy and you have no planned medical expenses on the horizon, you might be spending money needlessly by purchasing gap insurance. Or maybe you want the peace of mind that comes with total coverage and you’re willing to pay for it. It all depends on your preferences and situation.
Often, the people most likely to pay for additional, supplemental insurance are those whose primary health insurance policies come with high deductibles. If you opt to lower your premiums by accepting a high deductible and/or high co-pays or coinsurance amounts, you could end up with a pretty hefty bill on your hands should you need extensive medical care. With gap coverage you could reduce this burden significantly, and at little extra ongoing expense.
Of course, you’re virtually gambling that you’re going to face illness or injury that will make this extra coverage worthwhile, which is why most people only elect to pay for gap health insurance if they have known upcoming medical expenses. For certain people, gap insurance can make a world of difference, but it’s not for everyone and it cannot replace your primary health insurance policy.
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