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Gap insurance is a form of healthcare insurance that supplements a high-deductible insurance plan. With recent changes to the Affordable Care Act, many insurance premiums and health coverage deductibles are on the rise. Gap plans have been growing in popularity as a solution to reduce overall out-of-pocket costs and provide better access to healthcare.
A health insurance deductible is the amount that you have to pay out-of-pocket before your insurance plan will cover costs. For example, let’s say that your plan has a health insurance deductible of $1,500. That means that you have to pay for $1,500 worth of medical expenses out-of-pocket before your insurance plan will begin to pay for your healthcare expenses.
Between 2006 and 2015, the average out-of-pocket healthcare costs for Americans increased 230% per year according to the Kaiser Family Foundation. The rise in deductibles has been growing at a faster rate than employee wages, leaving policyholders to pay more for their healthcare year after year. This trend doesn’t seem to be slowing down anytime soon.
This trend has been largely attributed to the increase in overall medical costs, which has driven employers and individual enrollees to sacrifice lower deductibles in order to keep monthly premiums at a reasonable cost.
The Trend Toward High-Deductible Plans
High deductibles usually come with lower monthly premiums. People who are relatively young and healthy often decide to opt into a less expensive policy with a high health insurance deductible that just covers the bare minimum.
People also opt for high-deductible plans to save money. NPR reported that in 2016 more than 9 in 10 people buying healthcare insurance under the Affordable Care Act chose a plan with a deductible of $3,000 or more. Employers often switch to a higher deductible plan to regulate costs when policies become more expensive. This has the same effect of leaving policyholders (in this case, employees) to pay more out-of-pocket for their healthcare.
The problem is the price tag for well-care/preventative or emergency services under these plans often ends up being too expensive for the policyholder. People commonly don’t get the care they need as a result. That is why Gap insurance comes in handy.
How do Gap Plans Work?
Gap plans cover a set amount of your deductible for medical expenses. They “bridge the gap” between your deductible and what you can afford out-of-pocket. For example, if your deductible is $1,500 and your Gap plan deductible is $750, then you will only have to pay $750 in out-of-pocket costs. While you will have to pay a monthly premium for Gap insurance plans, they can still reduce your overall out-of-pocket costs.
Gap plans are not unique to the healthcare industry. Gap plans are found in many types of insurance, but they’ve become increasingly popular for health insurance as deductibles and policy premiums have become more expensive.
Since Gap health coverage policies are not major insurance policies, they’re not regulated the same way as other plans under the ACA. Because of that, you should make sure that a gap plan will cover your medical needs before opting in. For example, gap plans may not cover pre-existing conditions or certain medical procedures. Make sure when shopping for an affordable health insurance plan you are protected from high deductibles in the event of a medical emergency.