Breeze Logo

Ancillary health insurance & employee benefits: 2022 guide

ancillary health insurance thumbnail

People are more anxious nowadays — employees and employers alike.

They’re more concerned about the health of themselves and their loved ones. They may have more financial worries and concerns about their future employment than they did prior to the COVID-19 pandemic.

Employers can minimize some of that uneasiness by offering ancillary health insurance benefits to their employees. In this article, we'll take a closer look at:

Read on to learn more!

Ancillary insurance definition

What is ancillary insurance?

Ancillary insurance is supplemental health coverage that can be used to complement an existing health plan. Ancillary health insurance plans can help pay for treatments and other health-related expenses that traditional health insurance does not cover. Ancillary health insurance can be purchased individually from a private company or obtained by enrolling in a group plan offered by an employer. In either case, it's important to understand that ancillary insurance is not a replacement for traditional health insurance.

What are ancillary benefits?

Ancillary benefits refer to ancillary health insurance coverage provided by employers to their employees as part of their benefits package. Companies can offer ancillary employee benefits as either:

  • Voluntary benefits, which means employees pay 100 percent of the premium. The benefit for the employee is that they will pay a lower premium buying as part of a group plan than if they attempted to buy an individual policy.
  • Employer-contributory benefits, which means the employer pays anywhere from half to all of the premium cost for employees. As with health insurance premiums and retirement plan contributions, the employees’ share of ancillary benefits is deducted from their paychecks.

As with health insurance, employees pay their share of the premium on ancillary benefits through payroll deduction. When employees use benefits, a claim is submitted and the benefit amount is paid to the provider. For life insurance claims, the claim would go directly to the policy’s beneficiary.

Types of ancillary insurance products & benefits

These are among the most common ancillary benefits that employers can offer their employees today.

Disability insurance

Offering disability insurance to your employees can help them in the event they become too ill or injured to work for an extended period. Both short-term and long-term disability insurance benefits can replace some of the pay workers lose when they cannot work because of an injury or illness that is not related to their job.

According to the Bureau of Labor Statistics, 42 percent of private industry workers had access to short-term disability insurance plans offered by their employers in 2018. About 34 percent had access to employer-sponsored long-term disability plans.

Employers that offer group disability insurance typically pay the full cost. According to BLS, private employers in 2018 paid the full cost for 85 percent of workers with short-term disability coverage and 94 percent of workers with long-term disability coverage.

Whether you have group disability coverage or not, it's smart to own individual disability insurance coverage. Unlike group coverage, these plans are portable, which means they will remain intact even if switch employers.

Apply online for individual disability insurance!

Accident insurance

Accident insurance pays out a lump sum if you incur specific kinds of injury as a result of an accident. It covers a variety of injuries resulting from an accident. These may include dislocations, lacerations, concussions, burns, and other serious injuries. It can supplement health insurance if an accident causes you to have medical expenses that your health insurance doesn’t cover.

Life insurance

Life insurance provides financial security for people, such as family, loved ones, and business associates, who would be financially distressed if you were to pass away. It's a valuable benefit to provide your employees from all backgrounds, regardless of their current family, financial, or coverage situations.

Group life insurance offers employees the advantage of obtaining guaranteed coverage without having to go through health underwriting. This can open doors to coverage for individuals who may not be able to get covered elsewhere, whether it's due to pre-existing health conditions or any other reasons for coverage denial.

Vision & dental coverage

Vision and dental insurance coverage are often considered essential pieces of any modern employee benefits package.

Vision insurance provides benefits that typically cover routine eye health costs such as:

  • Eye exams
  • Contact lenses and fittings
  • Eyeglass lenses and frames
  • In some cases, discounts for LASIK procedures and other corrective surgeries.

Dental insurance policies provide benefits that cover some portion of the costs associated with dental care, including:

  • Preventive care
  • Fillings
  • Crowns
  • Root canals
  • Oral surgery, like tooth extractions

Depending on the insurance provider, the plan might cover orthodontics, periodontics, and prosthodontics, like dentures. Dental plans typically exclude veneers and implants.

Critical illness insurance

Critical illness insurance pays a lump sum benefit if you are diagnosed with a covered illness. It is designed to help people cover the cost of treating and recovering from expensive illnesses and procedures, such as heart attacks, strokes, and cancer. Critical illness insurance can pay for costs not covered by health insurance, such as deductibles and out-of-pocket costs. You can also use the funds for travel expenses and your regular bills.

Curious what critical illness insurance costs? Check your rate here.
What's your gender?
What's your birth date?
What's your ZIP code?
Calculating your quote...
Your Quote
$0.00
Estimated monthly price
Coverage Amount$40,000
$5k$75k

Pet insurance

For many, pets are considered a part of the family. People develop deep emotional connections with their pets — bonds that can help ward off loneliness and improve mental health.

It's no wonder why pet ownership has grown during the pandemic as people look to animals for comfort and companionship. Offering employees pet insurance will enable them to keep their pets healthy at a much lower cost.

Typically, pet insurance plans cover unexpected injuries, accidents, and illnesses, as well as surgery, medication, tests and diagnostics, emergency care, and exam fees.

Wellness benefits

You can offer a number of wellness benefits that give employees an incentive to stay healthy, which can help with productivity and lowering health-related costs. Wellness benefits can include paying a portion of the cost for a gym membership or exercise classes.

[ Related: What is financial wellness & why is it important ]

Why you should offer ancillary employee benefits

It wasn’t long ago that offering your employees health insurance and a retirement plan was sufficient. But workers are becoming more aware of the need for insurance that protects them beyond what their health insurance covers.

Here are some ways your company can benefit from offering ancillary lines of coverage as employee benefits.

Give employees low-cost benefits

While everybody is aware that traditional health insurance is extremely costly to both employers and employees, ancillary employee benefits cost comparatively little. Plus, by having multiple ancillary benefits, employees can choose which ones are right for their families.

Offer your employees peace of mind

Prior to the 2020 pandemic, many people didn’t consider the possibility of becoming critically ill or disabled. People are understandably more concerned with their health and that of their families. And the less that people worry about what might happen, the more they can focus on their work.

Increase retention, decrease turnover

Employees may be more inclined to stay at a job that gives them comprehensive insurance and preventative benefits. Offering unique employee benefits, such as ancillary lines of coverage, can help increase retention.

Get more competitive at recruiting talent

One of the effects of the pandemic is the move toward working from home. This may become standard procedure for a number of firms even after the pandemic ends. That means your company is not only competing against local businesses for talent but other businesses across the country. Offering ancillary benefits to your compensation package can make you more competitive.

Score tax savings with a Section 125 plan

The IRS established Section 125 to enable employees to receive certain benefits that are non-taxable. A Section 125 plan is also known as a cafeteria plan.

Both employees and employers can reduce their tax obligations with a Section 125 plan. Employees who spend $200 a month in pre-tax dollars can save, on average, about $60 on their tax bills. Employers save about $15 for every $200 an employee sets aside on benefits. Savings include FICA, the Federal Unemployment Tax Act, and workers' compensation insurance premiums.

Bottom line

Ancillary employee benefits are available to businesses of all sizes and budgets and they have a wide-ranging value for both employers and employees.

Employers — if you’re interested in ancillary benefits, talk to your employees about which offerings they would be most likely to enroll in.

Employees — don't be afraid to suggest this offering to your HR department as a new benefit option. If your idea doesn't stick but you still would like to explore ancillary coverage, you can always apply for individual coverage through a private insurance company.


The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.

Work-Life
Published October 13, 2020