Supplemental insurance is additional insurance you can purchase to help pay for services and out-of-pocket expenses that your regularmajor medical health insurancedoesn’t cover.
Some supplemental insurance plans will pay for the out-of-pocketcost-sharingthat goes along with your health insurance plan (ie, deductibles, copayments, and coinsurance), or for medical services that your health plan doesn’t cover at all, such as dental and vision costs.
Other supplemental plans may provide you with a cash benefit paid out over a period of time or given to you in one lump sum. The cash can be used for:
This article will explain the different types of supplemental health coverage and how you can decide whether they’re a good fit for your circumstances.
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Do You Need Supplemental Health Insurance?
Whether or not you need supplemental health insurance depends on a lot of different factors, such as what your current health insurance covers and how high your deductible is. Although many supplemental policies are not overly expensive, duplicate coverage may be unnecessary for many people.
Medicare is discussed in more detail below. But if you don’t have Medicare, your first step is to determine whether you and your family are fully protected with a regular health plan. If you think you need supplemental insurance, ask yourself the following questions:
When looking at that final questions, ask yourself:
There’s no one-size-fits-all answer, as it depends on your circumstances and the specific policy you’re considering.
Additionally, before purchasing a supplemental policy, be sure you understand its limitations and benefits. For example, it may not cover all the expenses you expected it to, it may impose waiting periods before payments start, or it may contain limits based on how much you paid and for how long.
Medigap: Medicare Supplemental Insurance
However, even for the medical services that Original Medicaredoescover, you still have some cost-sharing expenses:
You can purchase a Medigap policy to cover some or all of those deductible and coinsurance costs that you’d otherwise have to pay yourself under Original Medicare. Without supplemental coverage, these costs can add up, especially if you need extensive outpatient services (such as kidney dialysis) and have to pay Medicare Part B’s unlimited 20% coinsurance for all of it.
If you have Original Medicare but lack Medigap coverage, there’s no limit to how high your out-of-pocket costs can be. By contrast,Medicare Advantage planscap out-of-pocket expenses (including the cost ofprescription drugs as of 2024) without the need for supplemental insurance.But Advantage plans tend to have higher out-of-pocket costs than you’d have with Original Medicare plus a Medigap plan. Medicare Advantage plans also tend to have more limited provider networks, and generally imposeprior authorization requirementsfor a range of services.
If you have Original Medicare but lack Medigap coverage, there’s no limit to how high your out-of-pocket costs can be. By contrast,Medicare Advantage planscap out-of-pocket expenses (including the cost ofprescription drugs as of 2024) without the need for supplemental insurance.
But Advantage plans tend to have higher out-of-pocket costs than you’d have with Original Medicare plus a Medigap plan. Medicare Advantage plans also tend to have more limited provider networks, and generally imposeprior authorization requirementsfor a range of services.
If you’re enrolled in Original Medicare (Parts A and B) and have a Medigap policy:
Without Medigap (or other supplemental coverage, such as an employer-sponsored plan or Medicaid), there is no cap on how high your Original Medicare out-of-pocket costs can get, which is why most Original Medicare beneficiaries maintain some type of supplemental coverage.
The Medicare Part B deductible tends to increase from one year to the next (it’s $240 in 2024) but remains much lower than out-of-pocket costs under many other types of health insurance. And it’s much lower than the Medicare Part A deductible that applies if a person needs inpatient care (the Part A deductible is $1,632 in 2024).
If you became eligible for Medicare on or after January 1, 2020, none of the available Medigap plans cover the Part B deductible.If you already have a Medigap plan that covers the Part B deductible, you can keep it. If you were Medicare-eligible before the January 2020 cut-off, you can still apply for them. (In most states,medical underwritingis used if you apply for a Medigap plan after your initial six-month enrollment window ends.)
Other Common Types of Supplemental Insurance
Although Medigap is a common form of supplemental medical coverage, it’s only available to you if you have Original Medicare coverage.
There are many other types of supplemental health coverage that are available to people who have other types of health insurance. Your employer may offer them as a voluntary benefit, or you can purchase a plan directly from an insurance company.
Adult Dental and Vision Coverage
Dental and vision care are generally not included in health plans for adults.
Original Medicare doesn’t cover routine dental and vision (but most Medicare Advantage plans do) and most commercial health insurance plans don’t, either.
To get dental and vision coverage, you can enroll in a separate plan that covers dental and/or vision care. Employers often offer this as a supplemental coverage option for employees, with the employer paying a portion of the premiums.
If you don’t have the option of employer-sponsored dental and vision coverage, you can purchase coverage through the private insurance market.
Adult dental plans can often be purchased through the Marketplace (exchange) during open enrollment or a special enrollment period. In most states, adult vision coverage cannot be purchased through the Marketplace, but some state-run exchanges offer it.
Alternatively, adult dental and vision plans can be purchased directly from an insurer.
Children’s Dental and Vision Coverage
TheAffordable Care Actrequires individual and small group plans toprovide coverage for pediatric dental and vision services. Insurance companies may incorporate dental and vision into a medical plan or offer them as a separate plan.
One important point to note about stand-alone pediatric dental coverage: If you purchase it through the exchange/Marketplace in your state, the coverage must conform to the ACA’s essential health benefits rules, which means there will be a cap on out-of-pocket costs and no benefit limits. But if you purchase a stand-alone dental plan outside the exchange, the policy can (and almost certainly will) have benefit caps, even for children.
Critical Illness Insurance
Critical illness insurance, also known as disease-specific insurance, is meant to ease the financial burden of a serious illnesssuch as cancer.
Critical illness plans generally have a veryspecific list of diagnoses that will trigger a payout. If you get seriously sick with something that isn’t specifically listed on your policy, the plan won’t pay you anything—even if you incur substantial out-of-pocket costs as a result of the illness.
It’s important to understand exactly how the policy works before you purchase it so you’re not caught unaware in a tough situation, expecting a payout from your critical illness plan and then not receiving one.
Accidental Death and Supplemental Accident Plans
Two kinds of accident policies are available, including accidental death and dismemberment insurance (AD&D) and supplemental accident insurance. They’re often combined and sold together. The benefits vary from state to state due to local insurance regulations.
An AD&D policy will pay you a lump-sum cash benefit if you’re the named beneficiary of someone who died in an accident. These policies may pay smaller amounts if the person didn’t die but lost a limb, went blind, or became permanently paralyzed.
AD&D insurance does not pay for any deaths related to illness, suicide, or natural causes.
Accident medical insurance, also known as an accident indemnity policy or a supplemental accident policy, may pay for medical costs resulting from an accident or injury. Some of these policies may also pay for extended home care services and travel and lodging expenses for family members.
Some accident supplements will just reimburse you up to a pre-determined flat amount ($5,000, for example) if you have medical claims resulting from an accident.
Accident supplement policies are popular with healthy people who have high-deductible insurance plans, defraying upfront premium costs while providing a “backup plan” in the unlikely event of a calamity. The money can then be used to pay the health insurance deductible.
Having an accident supplement in addition to anHSA-qualified high-deductible health plandoes not interfere with your eligibility to make pre-tax contributions to a health savings account (HSA).
Hospital Indemnity Insurance
Hospital indemnity insurance, also known as hospital confinement insurance, provides a cash benefit if you’re confined to a hospital due to an illness or serious injury.
The cash benefit, doled out either in one lump sum or as daily/weekly payments, might not start until after a specified waiting period.
There are also fixed indemnity policies that pay up to a specified amount for various outpatient services and inpatient care. As is true for all supplemental policies, these plans are not adequate as stand-alone health coverage, as they can leave you with unlimited out-of-pocket costs in the event of a serious medical condition.
Summary
Supplemental insurance is never intended to stand alone as your only health coverage. Supplemental insurance is just that: a supplement.
Before signing on the dotted line, make sure you fully understand the benefits and limitations of the policy. If you don’t, contact your state’s insurance department with questions, or to get a referral to a consumer advocate or helpline.
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9 Sources
Verywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read oureditorial processto learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
Medicare.gov.Medicare costs.
Medicare.gov.Compare Medigap plan benefits.
Kaiser Family Foundation.A snapshot of sources of coverage among Medicare beneficiaries.
Kaiser Family Foundation.Medicare advantage 2020 spotlight: First look.
HealthInsurance.org.How is vision care covered under the Affordable Care Act?
HealthCare.gov. Health Benefits and Coverage.Dental coverage in the marketplace.
HealthCare.gov Glossary.Out-of-pocket maximum/limit.
Internal Revenue Service.Publication 969 (2023), health savings accounts and other tax-favored health plans.
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