What you may not know about supplemental health insurance

It’s easy to understand the importance of protecting ourselves and our families – we wear seatbelts, for example, because we understand how they keep us safe in case we’re in a car crash. We have medical checkups because we understand how our doctors can take action when they spot health problems.

Supplemental health insurance plans obtained through an employer or purchased as an individual are another way to protect ourselves and our families “in case” – in this instance, in case of a threat to our financial security from illness or accident. They’re called “supplemental” because they add to the coverage Canadians receive through their provincial governments. (Separate plans are available for visitors or recent immigrants without provincial health coverage.) But the kind of protection supplemental health insurance offers isn’t as easy to figure out as a seatbelt or a checkup. To help you understand how it works so you can weigh the merits of buying coverage, here are answers to some common questions:

How does supplemental health insurance actually work?

• Supplemental health insurance works by pooling or spreading financial risk. A large number of people pay into a shared pool, which provides the money to compensate members of the group for large, unexpected medical expenses as well as smaller, more routine costs.

Why are some things covered and some things not?

• So premiums can be priced properly and kept affordable, insurance companies have to be very clear and specific about what they do cover (benefits) and what they don’t (exclusions). The fewer the exclusions, the more costly the insurance. If there were no exclusions, the cost would be more than anyone could afford.

I sometimes pay more in supplemental health insurance premiums than I collect in benefits. Why is that?

• “This gets back to the pooling principle,” says Moshe Milevsky, Associate Professor of Finance at the Schulich School of Business. “In any given year, some people are actually getting more in claims payments than they pay in premiums, and others – like you – might be getting less. And, while this might not seem fair today, you never know when the tables might be turned; next year, the situation might be reversed.”

What do insurance companies do to avoid fraudulent claims?

• Insurance fraud by a few bad apples could result in increased premiums for everyone in a group. Billions of dollars are lost to healthcare fraud in Canada annually.
• Insurance companies have teams of experienced investigators trained to spot fraud. Their job is to ensure that genuine claims are paid and fraudulent ones denied.
• Companies offering electronic claims service monitor claims activity to flag unusual or suspicious claiming patterns for review.
• You can do a lot to help reduce the risk of benefits fraud: Keep your plan identification secure so someone else can’t make a claim under your name. Be sure to check and compare all your receipts to make sure you actually got the treatment or services for which you were billed. Never give pre-signed, blank claims forms to your healthcare service or paramedical provider to be filled out. By doing what you can to prevent fraud, you can help keep insurance premium costs down – and keep your benefits plan healthy.

What happens if I disagree with the decision my insurance company makes?

• Insurance companies normally have an internal complaint escalation process, and are subject to external complaint monitoring. If you disagree with your insurance company, use its complaints process. It’s a highly regulated industry, so even in the rare case that a mistake is made, you have a process for recourse.
• If you’re thinking of having an optional medical procedure, you can often find out ahead of time whether your insurance will cover it, before you decide to go ahead.
• Major insurers process millions of claims each year, and decline only a very small percentage.