What is gap insurance?

As the name implies, gap insurance serves to cover gaps in your insurance coverage. This type of insurance only lasts a short amount of time, giving you the breathing space you need to find a more long-term insurance solution. Gap insurance should not be viewed as a long-term insurance solution, as there are several disadvantages associated with this type of coverage. 

Aside from a few notable downsides, gap insurance is an ideal way to ensure you’re protected from financial hardship in the event of a medical emergency. Failing to organize gap insurance can be incredibly risky, as you never know what will happen over the course of the next few months. Even healthy, young Americans can easily experience accidents and unforeseen illnesses – making gap insurance a smart, responsible move. 

But wait – there’s another definition of gap insurance to consider. The term “gap insurance” may also refer to a type of supplemental insurance product that works alongside your employee health plan. This type of insurance is often referred to as “insurance for your insurance” because it can help provide coverage for high deductibles. In other words, gap insurance can help you deal with very high deductibles that you would otherwise be unable to pay.

Who might need gap insurance coverage?

Gap insurance can be effective for a range of individuals. However, all of these individuals have the same basic need: To get coverage over a short period of time while they organize a more long-term insurance solution. Here are a few examples:

  • People who experience changes in employment: If you lose your job, quit your job, retire, or have your hours reduced, you might need temporary insurance to bridge gaps in coverage. When you lose coverage under your employer, you can opt for COBRA. This temporary solution allows you to maintain your current employment health plan at a higher cost, but it eventually runs out. Once COBRA runs out, you may need to switch to a temporary gap insurance solution while searching for a long-term insurance plan. 
  • Young adults who are no longer covered under their parents’ plans: Once you turn 26, you may lose coverage under your parents’ insurance policy. If you find yourself in this situation, you might want to choose a temporary solution while attending college, as your post-college career might provide you with employment-based insurance. 
  • Those who are waiting for Medicare or Medicaid eligibility: Retirees and elderly individuals may only need to wait a few years before they become eligible for Medicare or Medicaid. If you find yourself in this situation, you might only need a temporary insurance solution to cover the gap in coverage for a short period of time. 
  • Those who are waiting for an open enrollment period: If you decide to switch insurance policies for whatever reason, you will need to wait for an open enrollment period. This might result in coverage gaps that last for just a few months or almost a year. Gap insurance can provide you with the coverage you need until you are able to choose a new plan. 

For the other definition of gap insurance, this coverage option can be beneficial for those who aren’t sure they can cover the deductibles on their employee health plan. These deductibles are steadily rising, and they can cost you thousands of dollars in additional fees each month. Approximately half of all Americans get their insurance through their employer, and up to 65% of all Americans are living paycheck to paycheck. This means that when faced with a deductible of a few thousand dollars, many of these workers will be unable to pay. This is why gap insurance can be an effective choice for many Americans.

What are my options for gap insurance?

There are a number of options for gap insurance, depending on what you are trying to achieve:

  • COBRA: For many employees who lose coverage through their employer’s group health plan, COBRA is the obvious solution. This program allows employers to continue receiving coverage under their previous plan for a short period of time – usually about a year. However, COBRA is relatively expensive.
  • Short-term insurance: Short-term insurance is offered outside of the ACA marketplace through private, unregulated vendors. Again, this option is relatively expensive but can get you across the finish line while you wait for a more long-term solution.
  • Health sharing plans: Health sharing plans represent an alternative to the entire health insurance industry. Based on systems set in place by traditional Christian ministry groups, modern sharing plans have nothing to do with faith and use innovative crowdfunding methods to facilitate cost-sharing between members. While this isn’t the same as insurance, it can help you pay your medical bills while you consider your options. 

For gap insurance that helps you pay high deductibles on your employer’s group plan, you can shop around for this product from multiple health insurance companies. These insurance products are not regulated by the ACA.

What are the limitations associated with gap insurance coverage?

One of the most obvious limitations associated with gap insurance is that it is not regulated by the federal government. This means that the insurance companies that offer these solutions are not required to adhere to the rules set forth by the ACA. This includes the requirement to accept individuals who have pre-existing conditions. Many have raised concerns about these unregulated policies, but it’s important to understand that many gap insurance plans are offered by reputable, established insurance companies. 

Another limitation is the cost involved. Whether you’re seeking temporary coverage after a change in employment or gap insurance for high deductibles, you’re going to pay additional costs compared to a run-of-the-mill, ACA insurance plan. Shorter periods of coverage almost always result in less affordability, including higher deductibles and premiums. And of course, the supplemental nature of employment gap insurance means that you’re going to pay more fees per month in addition to your employee plan premiums. Of course, the trade-off is that your deductibles will be lower in the case of a medical emergency. 

Cost-sharing plans represent a notable exception, as this option may be more affordable than even the cheapest ACA plans. Some crowdfunding plans require no deductibles and much lower average monthly fees compared to the premiums of a traditional insurance plan. This is why some individuals choose to stay with a cost-sharing plan permanently – even if they initially selected it as a temporary solution. 

Speaking of temporary solutions, the most obvious limitation associated with traditional, temporary gap insurance is that it is not designed to last forever. This type of solution only gives you enough time to consider your options, wait for an open enrollment period, and select a more appropriate long-term insurance solution. Again, health sharing plans are a notable exception – as they can be effective either as short-term or long-term solutions.

Why is gap insurance more expensive?

Insurance intended to deal with coverage gaps is almost always more expensive than a long-term solution. This is because insurance companies negotiate long-term contracts with providers, and short-term insurance plans do not fit with this business model. Short-term coverage periods may be more convenient if you’re waiting for something like Medicare eligibility, but they can never provide the same level of value as a long-term plan offered by an employer’s group plan or the ACA marketplace. 

Of course, health sharing plans are an exception because they do not function in the same way as normal insurance. Instead, these plans can be cheaper than both private short-term insurance plans and long-term ACA plans. For gap insurance specifically geared towards covering high deductibles, this coverage is more expensive because it is supplemental in nature. This means that it adds to the cost of your existing insurance plan instead of replacing it.

What is the cheapest gap insurance?

To find the cheapest possible gap insurance, you will need to shop around in the private marketplace and compare various plans offered by insurance companies. To assess your options, consider things like maximum annual out-of-pocket, monthly premiums, and deductibles. Many people make the mistake of only considering monthly premiums when trying to select the most affordable gap insurance, but this strategy can backfire. It’s important to consider the bigger picture and take into account all of your various potential costs. 

If you’re willing to consider alternatives to the traditional health insurance system, the cheapest way to cover gaps is with a health sharing plan. If you’re attempting to cover gaps in insurance while you wait for an open enrollment period or Medicare eligibility, a health sharing plan can definitely provide the same general benefits of an insurance policy – even though it’s technically not the same thing as insurance.

What are the pros and cons of gap insurance?

If you’re trying to cover a temporary period of no insurance, gap insurance offers plenty of benefits, including:

  • Coverage in the event of an emergency
  • Gives you time to consider your options for an ACA plan
  • Gives you time to wait for Medicare or Medicaid eligibility

The downsides of typical gap insurance are quite straightforward. This option will likely prove expensive, and it simply delays the inevitable. Sooner or later, you’re going to need to return to this issue and choose a more long-term solution. 

If you’re considering gap insurance to cover the high deductibles for your employment group plan, the pros and cons are also quite simple. The downside is that your monthly insurance costs will go up. The upside is that if you incur expensive medical bills, it’ll be easier to pay your deductible without sacrificing your family's resources.

What happens when I no longer need to worry about a gap in my insurance?

If you no longer need to cover any gaps in your coverage, you can end your temporary insurance plan. However, this might be easier said than done. For example, if you sign up for an 18-month short-term insurance plan but you become eligible for Medicare within just 12 months, you may need to pay for two separate insurance plans for six months. 

Alternatively, you could choose a health sharing plan that can be canceled at any time. This means that as soon as you find out you no longer need to cover a gap, you can switch to a more appropriate insurance plan seamlessly.

Is insurance my only option?

If you need help paying your medical bills, insurance is not the only option. You might also consider a health sharing plan when planning out your healthcare finances. A health sharing plan is not the same as insurance, but it can provide you with funding assistance for members who incur medical bills. There are many types of health sharing plans, and perhaps the most well-known are those based around religious groups. These are often referred to as “Christian health sharing ministries.”

Today, the most modern and innovative health sharing plans have nothing to do with religion, and they use advanced methods such as crowdfunding technology. These plans are proving popular for Americans who need to cover short-term gaps in insurance coverage. Alternatively, health sharing plans can serve as gap insurance for employees worried about deductibles. When you incur a medical bill as a member of many of these health sharing plans, you can get funding assistance with no deductible.

Can health sharing plans replace insurance and cover my gap?

Health sharing plans can never replace gap insurance because they are not the same as insurance. If you’re looking for a solution that is identical to insurance, you may need to consider other options. However, a health sharing plan can offer many of the same benefits as a mainstream gap insurance brand at a fraction of the cost. In some cases, these sharing plans can be used in place of insurance – whether you’re looking for a long-term insurance solution or short-term coverage while waiting for Medicare eligibility or an open enrollment period.

What health sharing plan should I use to replace insurance and cover a gap?

If you’d like to try a health sharing plan to cover your insurance cap, consider CrowdHealth. This new healthcare solution uses crowdfunding technology to facilitate easy, seamless funding of medical bills between members. One of the most notable benefits of CrowdHealth is that there are no deductibles. Many employees facing the possibility of high deductibles can use this option as a form of supplemental gap insurance without incurring significant additional monthly fees. In fact, the monthly fees for CrowdHealth can be as low as $175.

But CrowdHealth’s benefits are not simply limited to covering gaps and offering low premiums. With this option, you can also say goodbye to doctor networks and choose whichever provider you prefer. CrowdHealth will even negotiate bills on your behalf, pushing the cost of your healthcare even lower. Additional benefits include unlimited virtual health, unlimited talk therapy, discounted prescriptions, and personal care advocacy. If you’re searching for a viable alternative to traditional health insurance, reach out to CrowdHealth today to learn more.

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