Q: How do the ACA’s health insurance exchanges interact with critical illness plans?
A: In recent years, critical illness plans — sometimes called dread disease plans — have become increasingly popular as a voluntary benefit offered by employers, particularly to lessen the impact of switching to a higher deductible plan. Critical illness plans have also gained favor with individuals who buy them to supplement high-deductible individual market plans, but consumer advocates sometimes question whether the plans are worth the cost, and whether consumers are being fully informed about the coverage details prior to purchasing the policy.
Critical illness plans are not available through the state health insurance exchanges, and are considered an excepted benefit under the ACA. In that regard, they’re in the same category with some limited benefit plans, accident supplements, adult dental/vision plans, and short-term policies. Those types of plans are not regulated by the ACA, so they don’t provide the essential health benefits package, and can still use medical underwriting to deny applications based on medical history.
Under critical illness plans, benefits are paid directly to the patient if they are diagnosed with a coverable significant disease such as a stroke, heart attack, or cancer. There’s no coverage for medical conditions that aren’t specifically listed in the policy details, so critical illness plans are considered supplemental coverage, rather than comprehensive health insurance.
Because employers can offer critical illness coverage with no employer contribution, this is often an alternative sought by smaller businesses. Some smaller employers choose to offer only voluntary benefits, such a critical illness plans, since doing so provides their employees with something rather than nothing, and since small employers are not required to offer coverage under the ACA.
If your employer offers a critical illness plan, you’ll want to make sure that you’re not relying on it as your sole source of health coverage, as it will most definitely not be enough, and doing so would subject you to the ACA’s penalty for not having minimum essential coverage. You can purchase a health insurance plan through the exchange in this scenario, and pair it with the critical illness plan you get through your employer. You can still qualify for a subsidy in the exchange if the only employer-sponsored plan available to you is not considered minimum essential coverage (critical illness plans are not minimum essential coverage).
As long as you understand the details of your coverage and are using it to supplement a comprehensive health insurance plan, a critical illness plan might be a good fit for your needs. If you’re enrolled in a plan with a high out-of-pocket maximum, such as a Bronze level plan that covers an average of 60 percent of healthcare costs, a critical illness plan (and/or an accident supplement, depending on what worries you the most) might make you feel more comfortable with the out-of-pocket exposure on your plan.