What Is Gap Medical Insurance?
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Gap health insurance is a type of supplemental medical coverage that helps you pay for various expenses, such as your deductible, copays and coinsurance. It’s commonly paired with a high-deductible health plan (HDHP).
You may benefit from purchasing medical gap insurance if you’d like to protect yourself from high out-of-pocket expenses while paying low rates for high-deductible health plans.
What is gap health insurance?
Gap medical insurance helps you pay your deductible, copays and coinsurance associated with a high-deductible health plan (HDHP). High-deductible health plans have become more popular in recent years because they have had low rates even as the price of health insurance has risen.
The IRS requires that insurance plans meet certain deductible and out-of-pocket maximum thresholds to qualify as HDHPs.
IRS requirements to qualify as an HDHP plan for 2023
Individual | Family | |
|---|---|---|
| Minimum deductible | $1,500 | $3,000 |
| Maximum out-of-pocket expenses | $7,500 | $15,000 |
In 2022, the average HDHP deductible was $2,925 for an individual and $6,013 for a family — roughly double the minimum threshold set by the IRS for a plan to qualify as an HDHP.
- Deductible: The amount of money you have to pay before your insurance kicks in.
- Copay: A fixed dollar amount that you pay to access medical services once your deductible has been met.
- Coinsurance: A percentage of your medical costs you pay after meeting your deductible.
- Out-of-pocket max: The maximum dollar figure you’re responsible for paying in a single year.
That means the average individual would pay almost $3,000 out of pocket before health insurance would start paying for coverage. Gap health insurance coverage can help you pay for your deductible, copays and coinsurance up to your out-of-pocket max.
Gap health insurance may cover fewer services than your high-deductible health plan (HDHP). That’s because the government doesn’t subject it to the same rules and regulations as major medical insurance. For example, HDHPs are legally required to cover mental health services, while gap health plans aren’t.
It’s a good idea to compare your gap insurance and HDHP to check for differences in coverage. You should also be aware that gap health insurance may come with its own deductible, copays and coinsurance.
Medical gap coverage benefits
Health insurance gap coverage combined with an HDHP can save you money on monthly premium costs while providing similar levels of coverage compared to a normal health insurance plan.
A high-deductible health plan (HDHP), on average, will save you $982 a year in health insurance premiums compared to a PPO plan. A gap health insurance plan that costs $480 a year would still save you $502 when paired with a high-deductible plan while sharply lowering what you pay for medical services.
You can apply your gap medical insurance to a number of expenses, such as deductibles, prescription medicine, copays and coinsurance.
Is medical gap insurance worth it?
Gap health insurance is usually worthwhile for a high-deductible health plan (HDHP) if you believe that you’ll hit your out-of-pocket max. To find out if it's worthwhile, compare your anticipated out-of-pocket costs against your gap health plan’s annual price plus the out-of-pocket max.
For example, if you think you’ll pay $5,300 for your high-deductible health plan’s deductible and coinsurance, and you can purchase a gap policy with an annual premium of $480 and a $1,000 out-of-pocket max, then you can save $3,820.
Gap insurance isn’t the right solution for everyone. It’s important to be aware of the downsides and alternatives to gap insurance.
Who shouldn’t buy gap health insurance?
Gap health insurance may not be the right fit for every circumstance, including for more healthy individuals. Before you purchase gap health insurance, make sure you don’t fall into one of these categories.
- People who don’t visit the doctor often: Gap insurance might not be worthwhile if you have very low annual medical expenses.
- Individuals with preexisting conditions: Unlike more standard types of health insurance, gap insurance companies can charge people with preexisting conditions higher prices or even deny coverage outright.
- Those in need of mental health care: Many gap health insurance policies don’t cover mental health services.
Gap insurance vs. an HSA
Health savings accounts (HSAs) are the most common alternative to gap health insurance when purchasing a high-deductible health plan (HDHP). Gap insurance means buying a second insurance policy. An HSA, on the other hand, gives you the chance to save pretax money, which you can use to pay for medical expenses like your deductible, copays and coinsurance.
Some people prefer HSAs for the tax benefits and greater flexibility when it comes to spending. For example, you can pay for virtually any medical treatment with an HSA. Gap health plans often exclude certain services. They also usually come with their own deductibles and out-of-pocket costs.
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Frequently asked questions
What is gap health insurance?
Gap health insurance helps pay for expenses like deductibles, coinsurance and copays for high-deductible health plans (HDHPs). Gap plans make HDHPs more affordable and protect you against high out-of-pocket medical expenses.
What does gap health insurance pay for?
Gap health insurance helps pay for your deductible. It also covers trips to the doctor’s office, medical devices, treatments and prescription medicine costs up to your out-of-pocket max.
However, since it’s not subject to Affordable Care Act (ACA) regulations, it may exclude some medical services, such as preventive care, lab work and mental health treatment. These medical services fall under the essential coverage categories that all major medical insurance policies must cover by law.
How much does gap health insurance cost?
Health gap insurance plans are typically cheap. Many medical gap policies cost less than $50 a month.
Sources
ValuePenguin used HealthCare.gov, IRS.gov and the Kaiser Family Foundation to compile prices and information.