Product enhancements
drive continuing growth
“[I]n the last five years it’s been a ‘space race’ of innovation in supplemental health.”
—Conner Tung
Mid-South Ancillary Team Lead
USI
By Thomas A. McCoy, CLU
Rising deductibles and co-pays in high-deductible health plans (HDHPs) have left employees exposed to financial and health risks. Voluntary supplemental health products have helped fill this gap and, consequently, they have enjoyed strong growth. As with any product in an expanding market, supplemental health has attracted a crowd of providers.
“More group carriers are entering the market,” said Conner Tung, mid-south ancillary team lead for national broker USI. “And in the last five years it’s been a ‘space race’ of innovation in supplemental health.”
Mike Rose, national supplemental health benefits practice leader for USI, agreed. “Supplemental health benefits market products are simply better than they used to be. Under accident policies, for example, the addition of coverage for youth sports has been a driver of growth.
“Under hospital indemnity, maternity coverage has been another strong contributor to growth,” he continued. “The average cost of a maternity claim is around $18,600, depending on the area of the country, with the employee’s average out-of-pocket cost around $2,800. The data show that people are being offered hospital indemnity, they’re buying it and they need it.”
Tung, Rose and executives from Guardian Life spoke about innovation in voluntary supplemental health coverage at a recent Guardian Life webinar.
Guardian’s 13th annual Workplace Benefits Study, conducted early last year, found that between 2014 and 2024, employers offering voluntary accident coverage rose from 36% to 58%; critical illness from 25% to 39%; and hospital indemnity from 22% to 30%.
Ownership of these products by employees over those 10 years grew from 16% to 46% for accident; 10% to 25% for critical illness; and 8% to 25% for hospital indemnity.
Jason Anderson, supplemental health products manager at Guardian, pointed out, “Supplemental health products have been around for decades. We entered that market in 2008. Our original critical illness (C.I.) product covered only six or seven conditions. Today our C.I. policy covers over 60 different benefits.
“We have introduced an infertility benefit under our critical illness policy and will be adding it under our hospital indemnity product, too.”
Tung said, “Under critical illness policies, in the last two years, we’ve seen a lot of momentum in products supporting women’s health and family planning such as problems with conception. We look for more development of products tied to infertility.
“Another emerging area of interest is behavioral health—products covering conditions such as schizophrenia, bipolar disorder and post-traumatic stress disorder (PTSD). HR departments that promote these products are helping to take away the stigma associated with these conditions.”
Rose said another reason for growth in supplemental health is “frankly, more claims are being paid. With supplemental products we’re trying to do the opposite of what we do in medical coverage. In medical, everyone wants low loss ratios, but in supplemental health we want to pay more benefits to the employees, giving us higher loss ratios.”
“Claims integration is a big part of it,” Tung added. “As more carriers have entered the supplemental health market, there’s been an increased need to create value, which has been accomplished by integration with other products in the company’s portfolio.
“Claims integration with short-term disability was relatively new three or four years ago. In my opinion, that’s now non-negotiable. The level of integration has moved beyond ‘auto notification’ (nudging the employee to file a claim—‘we filed your short-term disability but you might be eligible for an additional benefit under some other line of coverage’).
“Now we’re moving to full auto adjudication, where the employee doesn’t need to file the claims themselves. We can automatically start sending checks for the benefits to the supplemental health client without having any paperwork done.
“We are seeing similar functions with carriers’ absence management solutions. And as of this year, we are seeing supplemental health products integrated with self-funded medical plans—usually in the 1,000-employee space, regardless of whether the carrier is a medical carrier,” Tung said.
Guardian research suggests that at the heart of the success of supplemental health products is employee peace of mind. Its 2023 study showed that workers who own supplemental health insurance are 25% more likely to report high overall well-being compared to those who don’t.
More than half of those workers surveyed who owned accident insurance reported high financial well-being (56%) and emotional well-being (52%).
“Our industry has steered employees to HDHPs in order to save on their healthcare costs,” Tung noted. “The tool we use to give them more peace of mind about their health plan has been a health savings account (HSA). However, HSAs are used primarily for predictable healthcare costs such as daily prescription use and doctor visits.
“Can most people say they have five-figure balances in their HSA specifically for unforeseen circumstances like a cancer diagnosis, heart attack, stroke, Alzheimer’s or dementia—that are covered under a C.I. policy? Probably not. The C.I., accident and hospital indemnity policies are great tools to handle large, unforeseen expenses.”
“We do a lot of one-on-one scheduled virtual interviews … . We encourage the employees to have
their partner with them.”
—Mike Rose
National Supplemental Health
Benefits Practice Leader
USI
A growing number of employees with HDHPs recognize the risk of these unforeseen expenses. Guardian research shows that between 2022 and 2025, the percentage of adults who believe their medical plan is sufficient to cover a major medical emergency has fallen from 62% to 51%. Around 70% of those surveyed own at least one supplemental health product.
Rose was asked about strategies they use to encourage employees to enroll in supplemental health coverage. “We do a lot of one-on-one scheduled virtual interviews,” he said. “This works well because the interviews are private and can be arranged before or after work. We encourage the employees to have their partner with them.
“If they are going through an HSA, they can have all their prescription drug receipts from the year before, and it becomes an informed decision as they take time and walk through it.”
He said the use of “stories” can be an effective motivator for promoting supplemental health to a workforce. “There was one young couple with newborn twins who went into the neo-natal intensive care unit. Their out-of-pocket expense for the hospital was $28,000. They had a hospital indemnity policy with no pre-existing condition which paid them $30,000.”
Anderson suggested, “When supplemental health products are introduced, we recommend that they be placed on the benefits platform directly after the medical insurance, forcing employees to either accept or reject the coverage.”
Looking to the future, Tung said, “Although supplemental health products are offered primarily on a voluntary basis, we have seen a pretty significant increase in the number of our clients who are exploring employer-paid alternatives. They might be moving toward paying the employee-only portion of the cost or possibly all tiers (including coverage for the whole family).
“This employer-paid strategy for supplemental health can be a tool to help employees mitigate the increases in cost-sharing in their medical expenses that they’ve experienced over the last decade.”
The author
Thomas A. McCoy, CLU, is an Indiana-based freelance insurance writer.
