Build an essential financial safety net for out-of-pocket expenses.
Increasing health care costs continue to drive the need for voluntary benefits, also known as supplemental insurance. If you don't have voluntary insurance already, and even if you do, you may have questions about these benefits and wonder, “What is voluntary insurance” or “How is it different from my major medical policy?”
For many people, voluntary benefits help solve a number of common concerns and challenges. Even for those with comprehensive major medical plans, medical and non-medical out-of-pocket costs associated with an illness or injury can be substantial. So, having the right voluntary policies in place can help ensure you have ample financial protection for the things that matter most.
The basics of voluntary insurance
Simply put, voluntary insurance plans help people protect their financial well-being in the event of a serious accident or illness. These policies offer a way to stay ahead of the medical, non-medical and out-of-pocket expenses that add up quickly after an injury or illness. From emergency treatment and transportation costs to everyday bills, voluntary insurance pays cash benefits directly to the policyholder, unless he or she designates otherwise.
Health care reform: Gaining more responsibility, but still facing risks
You may have noticed that health care is becoming more customer-focused. From prescription drug commercials to doctor visits, you're becoming more involved in health care decisions.
Employers are also introducing benefits plans that give you more decision-power. These plans are often called “consumer-driven health plan options” and include High Deductible Health Plans (HDHPs) with a health savings account and/or health reimbursement account (HSA or HRA). In many instances, Americans are making more of their own health care choices – including how much to spend on health care coverage and what types of coverage to have.
With so much responsibility, it's important to calculate risk. It may come as a surprise, but the cost of medical care – even for those with major medical coverage – can be daunting. In fact, 20 percent of American adults are struggling to pay their medical bills, and 3 in 5 bankruptcies are due to medical bills. And despite having year-round insurance coverage, 10 million insured Americans ages 19-64 will face bills they're unable to pay.1 While no one anticipates the unexpected, injuries and illness pose more than simply health risks; they also pose financial risks. As you become more responsible for your own health care decisions and costs, voluntary policies can help you build a smarter benefits package and a stronger financial safety net.
Discover the real cost: You can learn more about the real costs of injury and illness with Aflac's Real Cost Calculator.
How out-of-pocket costs work
Out-of-pocket medical costs are a reality – regardless of changes related to health care reform – and can add up quickly. Some can be very much unexpected, so it's important to consider where they arise:
Deductible: The amount owed for covered health care services before your health insurance or plan begins to pay. For example, if a plan deductible is $1,000, the plan won't pay anything until you pay $1,000 toward covered health care services subject to the deductible. The deductible may not apply to all services.2
Coinsurance: The percentage you pay toward each covered health care service. The coinsurance is paid on top of any deductible. For example, let's say your company offers an 80/20 health insurance plan and the allowed amount for an office visit is $100. Once you've met your deductible, your coinsurance payment of 20 percent would be $20. The health insurance or plan pays the rest of the allowed amount.2
Copay: A fixed amount – for example, $15 – you pay for a covered health care service, usually when you receive the service. The amount may vary by the type of covered health care service.2
Non-medical costs: When faced with a serious accident or illness, there are various non-medical costs associated with a hospital stay or recovery time, including child care, transportation and reduced take-home pay due to missing work. These expenses can add up quickly, contributing to the overall out-of-pocket cost of being sick or injured.
Limits or exclusions: Pay attention to services not included in your plan, as well as any limitations or exclusions. Due to health care reform, plans will no longer have lifetime or annual limits on essential health benefits, but there may be limits related to other items, such as the number of refills for certain drugs, the number of visits to certain specialists or the number of days covered for certain benefits. These limits or exclusions could mean unexpected out-of-pocket costs.
Out-of-pocket limit: Out-of-pocket costs are different than out-of-pocket limits. Out-of-pocket limits are established by the IRS, and for 2015 they are $6,450 for individual coverage and $12,900 for family coverage. This means you will pay coinsurance – in a variety of ways as determined by your health plan – up to your out-of-pocket limit. These limits apply only to covered expenses, so if you or a family member incurs non-covered expenses, they will not count toward your out-of-pocket limit. This adds to your potential unexpected costs.
Voluntary insurance helps support your financial safety net
For many, voluntary benefits have long been solutions for building a stronger financial safety net:
Benefits when you need them most: Unlike major medical insurance, voluntary insurance benefits are paid directly to policyholders when they are sick or hurt, unless they designate otherwise.
Affordable benefits for any life stage: If you are like most individuals, you would be hard-pressed to pay even small health care expenses that aren't covered by a major medical plan. Voluntary benefits offer a variety of levels and types of coverage to meet individual needs and life stages, and you can choose the ones that best fit your lifestyle. Voluntary policies are low-cost options that help protect your financial future. For example, Aflac's most popular policy, Accident Indemnity Advantage®, costs as little as $4.98 per week.3
You choose how to use your benefits: With voluntary coverage, you decide how you want to use your policy's cash benefits. That means you can use them to pay the monthly mortgage or rent, child care costs or even grocery bills. These are benefits that everyone can use!
Gain more with voluntary insurance
Voluntary policies, like those offered by Aflac, work with major medical insurance to help provide financial protection to policyholders. As health care costs continue to rise, these policies serve as important and affordable financial buffers for your family. Unlike major medical insurance, voluntary insurance pays cash benefits directly to you, unless otherwise assigned, if you are sick or injured. Consider asking your employer about these popular options:
Hospital Confinement Indemnity Insurance6
Short-term Disability Insurance7
For a more in-depth look at voluntary insurance, check out Voluntary insurance 101.
1 NerdWallet (2014). NerdWallet Health finds medical bankruptcy accounts for majority of personal bankruptcies, accessed on October 16, 2014, from http://www.nerdwallet.com/blog/health/2014/03/26/medical-bankruptcy/.
2 Definitions and examples were adapted from healthcare.gov/glossary.
3 Rate is based on individual coverage for ages 18–70, 24-Hour Accident-Only, Plan 2, no riders, payroll deduction, Industry A.
4 In Idaho, Policies A35100ID, A35200ID, A35300ID, A35400ID, A35B24ID, and A35BOFID; in Oklahoma, Policies A35100OK, A35200OK, A35300OK, A35400OK, A35B24OK, and A35BOFOK.
5 In Idaho, Policies A76100ID, A761ESID, A78100ID, A78200ID, A78300ID, and A78400ID; in Oklahoma, Policies A76100OK, A761ESOK, A78100OK, A78200OK, A78300OK, and A78400OK.
6 In Idaho, Policies A49100ID, A49200ID, A49300ID, A49400ID, and A4910HID; in Oklahoma, Policies A49100OK, A49200OK, A49300OK, A49400OK, and A4910HOK.
7 In Idaho, Policy A57600IDR; in Oklahoma, Policies A57600OK and A57600LBOK.
Individual coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, individual coverage is underwritten by American Family Life Assurance Company of New York. Policies may not be available in all locations.