Does Catastrophic Health Insurance Make Sense for Your Employee Benefits Plan?
By: Benefits by Design | Tuesday August 20, 2019Updated : Tuesday May 30, 2023
When we say group insurance or employee benefits, what do you think of?
Most think of the more traditional options like Life Insurance, Critical Illness, and maybe Disability Insurance. These insurance products protect against high-cost, unexpected events that might otherwise drastically affect a person’s life, financial stability, or ability to work. It’s the coverage you want to have but hope never to use.
However, when it comes to Health Insurance, you might think of: massage therapists, physiotherapists, podiatrists, or medically necessary drugs.
Health Insurance also protects against unexpected, high-cost drug and medical expenses through catastrophic insurance.
Pairing Catastrophic Health Insurance with a Health Care Spending Account
What is catastrophic insurance?
Catastrophic health insurance covers plan members and their dependents for essential unpredictable, and often pricey, medical expenses. Moreover, for many catastrophic plans, a deductible must be satisfied by eligible expenses before essential health services and supplies are covered at 100%.
For our catastrophic product, our deductible can be satisfied by claiming:
- Prescription drugs
- Eligible medical equipment
- Private duty nursing
- Accidental dental
- Hospital and emergency travel
For a plan member to have 100% coverage for essential health expenses, their deductible must be satisfied. Any out-of-pocket costs for eligible expenses submitted through their plan are applied to their deductible.
Does catastrophic insurance make sense for my employee benefits plan?
Often, catastrophic coverage makes sense for employers who want to protect employees from expenses that might otherwise leave them financially at-risk, such as high-cost drugs or hospital and emergency travel.
Every employer and business is different. Depending on an employer’s values or the coverage they’re looking for, catastrophic insurance may not be the right fit. Here are a few situations where catastrophic insurance might not work:
You want to provide a benefits plan to keep employees healthy and well by covering their day-to-day expenses, like Health and Dental.
(Recommended: Traditional Extended Health Care (EHC) and Dental Insurance).
You have an existing plan with stable claims history but feel they’re paying premiums for underutilized benefits and want to reduce costs.
(Recommended: Administrative Services Only (ASO) funding model).
Your employees value flexibility and want to decide when and for what to use their coverage.
(Recommended: Spending Account).
I want to provide catastrophic coverage to my employees. In addition, I want to include coverage for their day-to-day health expenses. How can I do that?
A Health Care Spending Account (HCSA) pairs well with catastrophic insurance.
An HCSA provides plan members and their eligible dependents with a dollar amount for eligible health expenses. The Canada Revenue Agency (CRA) regulates HCSAs and determines what expenses are eligible. Here are some of the expenses that can be covered by their HCSA:
- Dental services
- Paramedical expenses
- Other medical supplies or equipment
This list is not complete. A full list of eligible expenses is available on the Canada Revenue Agency website.
You design the HCSA by allocating funds to each plan member. Also, you decide whether or not the HCSA allows for rolling claims, rolling contributions, and the frequency of allocations (monthly, quarterly, semi-annually, or annually).
Can I add additional coverage to a catastrophic health plan?
In many cases, employers can choose to combine catastrophic insurance with a health care spending account and pooled benefits (life insurance, disability, critical illness, accidental death & dismemberment) for additional coverage.
True to our name, you can build a comprehensive employee benefits plan to promote and protect your employees’ health, wealth, and happiness without breaking the bank.