Could supplemental coverage help lower the out-of-pocket costs of my Marketplace health insurance?

If you’re enrolling in health insurance through the Marketplace (HealthCare.gov or a state-run exchange), you’ll encounter plans with not only a wide range of premiums, but also a range of deductibles and out-of-pocket costs. The trade-off is obvious: choosing a plan with lower premium sometimes comes with higher deductibles and out-of-pocket costs.

But could supplemental insurance combined with a Marketplace plan help soften the blow by covering some of those out-of-pocket costs?

Marketplace plan deductibles can be daunting

Lower premiums that come with lower metal-tier Marketplace plans – such as Bronze plans – can certainly be attractive. But depending on your finances, it could be challenging to come up with the money to pay the deductibles and other out-of-pocket costs for those plans. According to a recent Bankrate analysis, more than half of American adults wouldn’t pay an unexpected $1,000 expense from their savings¹ – and that’s less than a third of the average Marketplace deductible.²

Regardless of how healthy you are, a significant medical event can occur at any time, requiring you to meet your health plan’s deductible. If that would be a financial burden, you may want to consider supplemental coverage that would reimburse you for some or all of your out-of-pocket costs if you meet the supplement insurance policy’s requirements.

Deductibles for Marketplace coverage can be much higher than deductibles for employer-sponsored health plans

For people with employer-sponsored health coverage, the average deductible for a single employee in 2024 was $1,787 (across the 87% of plans with a deductible).³ Although people who enroll in Marketplace coverage generally have a much wider range of plans from which to choose compared with people who are offered group coverage by an employer, the weighted average deductible for Marketplace health plans is over $3,000 for a single individual in 2024.²

The average deductible for Marketplace health plans varies considerably depending on the metal level (Bronze, Silver, or Gold) and whether the person is enrolled in a Silver plan that includes cost-sharing reductions (CSR). For Bronze plans, the average deductible is over $7,000, while Silver plans with the most robust level of CSR have an average deductible of just $90.²

But after accounting for plan selections made by enrollees, the weighted average deductible is 71% higher for Marketplace plans than for employer-sponsored plans² – and that doesn’t count the fact that 13% of employer-sponsored plans have no deductible at all.³

How various types of supplemental insurance might help

There are a variety of types of supplemental insurance, but the ones that could prove most useful for helping to pay your out-of-pocket deductible costs are accident insurance, critical illness insurance, cancer insurance, and fixed-indemnity insurance.

None of these is suitable to serve as a person’s only health coverage – even if you were to purchase all of them together. But they may work well for you in conjunction with major medical health insurance, potentially reimbursing you for expenses that you would otherwise have to pay out of your own pocket if you meet the supplemental policy’s requirements.

Cancer insurance or critical illness insurance that provides a cash benefit

As an example, let’s say you have a Bronze-level Marketplace plan that has a $7,500 deductible and 20% coinsurance until you reach a $9,000 maximum out-of-pocket limit. If you get diagnosed with cancer and have to begin chemotherapy and radiation, you can expect to quickly hit your maximum out-of-pocket,⁴ meaning you’ll have to pay $9,000 in medical bills.

But if you have a cancer insurance policy or a critical illness policy and your cancer is covered by the policy, you could be eligible to receive a cash benefit that you could use to help pay your deductible. The amount of the benefit would depend on the specifics of your policy and the treatment you need; there’s a lot of variation in the benefits offered and the conditions that must be met to receive a payout.⁵

Accident insurance that reimburses you for out-of-pocket costs

An accident insurance policy could also be a useful addition to your Marketplace plan, as these products are designed to reimburse you for some or all of your out-of-pocket costs for a medical claim that stems from an accidental injury. As is the case with critical illness and cancer insurance policies, the benefit amount will depend on the policy specifics and the care you receive. But an accident supplement can help to cushion the financial cost of having to meet your deductible for something like a broken bone, torn ACL, or a serious cut that requires stitches.

Fixed-indemnity insurance could help with a wider range of claims

Fixed-indemnity insurance can also be a useful addition to a Marketplace plan. Depending on the policy specifics, it may pay benefits for a wider range of claims than the aforementioned types of supplemental coverage.

Fixed-indemnity plans that are sold in the group market (employer-sponsored plans) can only pay benefits on a per-period basis (per day or other unit of time), whereas fixed-indemnity plans sold in the individual market are currently allowed to provide benefits on a per-period or per-service basis.⁶

So an individual-market fixed-indemnity plan might pay, for example, $500 per day of inpatient hospital care, $50 for each primary care visit, $200 for an outpatient surgery, etc. The specifics will vary by plan, but it’s important to understand that the total amount of benefit you receive will depend on both the policy’s fee schedule as well as the medical care you end up needing.

As is the case with any supplemental insurance that works on a reimbursement basis, you can use the cash you receive for whatever expenses you like, including paying your deductible.

Supplemental coverage combined with a health savings account

High-deductible health plans (HDHPs) can be a popular choice for people who want to take advantage of the tax benefits that go along with making contributions to a health savings account (HSA). You can only contribute to an HSA if you’re enrolled in an HSA-qualified HDHP, with no other major medical coverage.⁷

But there are several types of supplemental coverage that the IRS allows a person with HDHP coverage to have and still be eligible to make HSA contributions.⁷ They include specific-disease coverage (such as cancer insurance), accident insurance, dental and vision insurance, and fixed-indemnity coverage that pays a fixed benefit per day or other period. (Although fixed-indemnity plans sold in the individual market can provide benefits on a per-period or per-service basis,⁸ IRS rules only allow per-period plans to be used by someone who has an HDHP and wants to continue to be eligible to contribute to an HSA.⁷)

If you have HDHP coverage, your deductible in 2025 will be at least $1,650 for a single individual, and possibly as high as $8,550.⁹ And under IRS rules, the plan cannot pay for any services other than preventive care before the minimum deductible is met.¹⁰ (Non-grandfathered HDHPs, like all non-grandfathered health plans, must pay for certain preventive care without requiring the enrollee to pay any out-of-pocket costs. But unlike other health plans, HDHPs can only pay for preventive care before the minimum deductible is met.) So for non-preventive services, you’ll have to pay at least $1,650 out of your own pocket before the health plan will start to pay for any of your care.

If you have funds in your HSA, you can use that money, pre-tax, to pay your out-of-pocket medical costs.¹¹ But if you don’t have money in your HSA or if you don’t want to use your HSA funds, supplemental insurance can be another way to cover some of the costs you would otherwise have to pay out of your own pocket.

It’s important to understand that you cannot use pre-tax HSA funds to pay for an expense for which you’re also being reimbursed by another source.¹¹ So you can only make a pre-tax withdrawal from your HSA to cover out-of-pocket costs that are not reimbursed by your supplemental coverage. The IRS requires you to “keep records sufficient to show that” any HSA distributions taken pre-tax are to pay for qualified medical expenses that aren’t “reimbursed from another source.”¹¹

Supplemental coverage might make a plan with a high deductible more appealing

One of the advantages of an HDHP is that it may have lower premiums than traditional health plans.¹² The same is generally true of the Bronze plans available in the Marketplace, which tend to have the lowest monthly premiums¹³ before subsidies are applied; after-subsidy premiums depend on an enrollee’s household income.

But while lower premiums are certainly a benefit, the fact that you have to meet an HDHP’s deductible before the plan will pay for non-preventive care can be challenging. And as noted above, the average Bronze plan has a deductible of more than $7,000. Depending on your financial circumstances, that could be a heavy lift.

Having supplemental insurance might make you feel more comfortable choosing a plan with a higher deductible, since your supplemental plan would reimburse you for some of your costs if you were to have a covered claim.

You’ll need to do the math to see if the total premiums for the health plan plus the supplemental coverage would provide a better value than enrolling in a Marketplace plan that has lower out-of-pocket costs but higher monthly premiums. As always when it comes to insurance, there’s no one-size-fits-all solution. But adding supplemental insurance might be a way to find the most affordable Marketplace plan that meets your needs.

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org.

1. “Bankrate’s 2024 Annual Emergency Savings Report” Bankrate. June 20, 2024 ⤶
2. “Deductibles in ACA Marketplace Plans, 2014-2024” KFF.org. Dec. 22, 2023 ⤶ ⤶ ⤶ ⤶
3. “Employer Health Benefits, 2024 Annual Survey” KFF. Oct. 9, 2024. ⤶ ⤶
4. “How much does cancer treatment cost?” City of Hope. July 18, 2023 ⤶
5. “A Shopper’s Guide to Cancer Insurance” National Association of Insurance Commissioners. Published 2022; Accessed Sep. 26, 2024 ⤶
6. ”Short-Term, Limited-Duration Insurance and Independent, Noncoordinated Excepted Benefits Coverage” Internal Revenue Service; Employee Benefits Security Administration; Health and Human Services Department. April 3, 2024 ⤶
7. “Publication 969 – Other Health Coverage” Internal Revenue Service. Accessed Sep. 25, 2024 ⤶ ⤶ ⤶
8. “Short-Term, Limited-Duration Insurance and Independent, Noncoordinated Excepted Benefits Coverage” Internal Revenue Service; Employee Benefits Security Administration; Health and Human Services Department. April 3, 2024 ⤶
9. “RP-2024-25” Internal Revenue Service. Accessed Oct. 25, 2024 ⤶
10. “Health Savings Accounts and Other Tax-Favored Health Plans” Internal Revenue Service. Accessed Sep. 25, 2024 ⤶
11. “Publication 969, Qualified Medical Expenses” Internal Revenue Service. Accessed Sep. 26, 2024 ⤶ ⤶ ⤶
12. “High-Deductible Health Plan Pros and Cons” Cigna. Accessed Sep. 26, 2024 ⤶
13. “Average Marketplace Premiums by Metal Tier, 2018-2024” KFF.org. Accessed Sep. 26, 2024 ⤶