As employees face higher co-pays, deductibles and health care premiums, a relatively new insurance product has become increasingly popular.

It’s known as “gap” or “bridge” insurance, and it covers some of the out-of-pocket health care costs that are becoming more difficult for employees to shoulder, such as annual deductibles that are rising to $1,000, $2,500 or even $5,000.

Families that live paycheck to paycheck can’t absorb the increase in costs, said Brad Peak, vice president of products and marketing with the insurance carrier Assurant Employee Benefits in Kansas City, Mo.

Who pays for it Many of the products are sold through the workplace with employees paying the full cost. Other times employers pick up the tab, most often coupling lower-priced, high-deductible health care plans with the supplemental gap coverage to ease the sting of higher out-of-pocket costs.

The trend is moving toward the $2,500 deductible, Peak said. Assurant views that as the “sweet spot” that makes gap insurance attractive to employees on a budget.

Some companies have also found that it can be cheaper to switch to a high-deductible health care plan and pay for gap coverage than to pay for a lower deductible, he added.

Not all sold on coverage. Some employee benefits experts, however, question the value of gap insurance. It can be expensive for what it offers. Some limitations on coverage for pre-existing conditions can make it useless for someone with a chronic medical problem. And the rules may be prohibitively restrictive, such as limiting reimbursement to patients whose conditions require hospitalization.

Brett Haugh, a partner with Employee Benefit Solutions in Houston, which designs employee benefit programs for client companies, said some of the policies are sold using high-pressure methods that rely on describing worst-case scenarios.

Haugh said the policies can be pricey, with about 50 cents of every dollar going toward the broker’s commission, and companies that offer the coverage tend to be restaurants and hotels or motels that rely on lower-paid employees.

“Big exploration and production companies don’t have this stuff,” he said.

Spring Branch Independent School District offers gap insurance that is not subsidized by the district. The coverage pays a lump sum benefit of $1,500 in the event of a hospitalization and $50 toward one medical test a year, according to the plan materials.

Fewer than 5 percent of district employees enroll, district spokesman Steve Brunsman said.

Much of the interest in gap insurance comes from businesses that aren’t big enough to self-insure but want to provide coverage for 10 to 250 employees and dependents, said Michael Chapman, a broker with Group Benefits Advisors in Dallas.

Chapman said his clients, some of which are in Houston, have been particularly interested because they’re facing the second or third consecutive year of big insurance cost increases.

“It’s forcing them to shop a little more,” he said.

Policies vary, and gap insurance may make sense for some customers.

AlphaStaff, a Fort Lauderdale, Fla., company that manages human resources for client companies, including some in Houston, offers employees of its clients a plan that just provides gap coverage for in-hospital care.

That’s where employees incur the biggest costs and where the premiums are the most affordable, said Dorothy Miraglia, principal of strategic benefits for the AlphaStaff.

One AlphaStaff client covers the entire cost of the gap supplemental coverage, she said. The others offer it to employees but don’t subsidize the cost.

Who signs up depends on the underlying medical care plan, Miraglia said.

Gap insurance attracts 20 percent to 25 percent of employees whose medical plans carry high deductibles — anything greater than $500, she said. They pay $12 to $18 a month for individual gap coverage and twice as much for a family plan.

But for folks whose deductibles are $250, gap insurance doesn’t make as much financial sense.

lm.sixel@chron.com

Google News: Health Insurance Tab

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