Supplemental Health Products Surge as Employees Seek Layered Coverage
In a year defined by rising healthcare costs and shifting employee expectations, supplemental health insurance products are experiencing a notable surge. According to LIMRA’s latest workplace benefits sales data, accident, critical illness, and hospital indemnity insurance sales rose 11% year-over-year through the third quarter of 2024. This growth reflects a broader trend: employees are increasingly seeking layered protection to fill gaps left by traditional health plans.
The surge is driven by several converging factors. First, high-deductible health plans (HDHPs) remain prevalent, leaving many employees exposed to significant out-of-pocket costs. Supplemental products like hospital indemnity and critical illness insurance offer targeted financial relief—providing lump-sum payments or daily benefits that can be used for medical bills, transportation, or lost income.
Second, employee awareness is rising. As healthcare literacy improves and digital enrollment platforms become more intuitive, workers are better equipped to understand their risks and select coverage that aligns with their needs. This is especially true among Millennials and Gen Z, who tend to favor customizable, modular benefits over one-size-fits-all packages.
“We’re seeing an increased focus on personalization for employees when it comes to their benefit options,” said Kara Hoogensen, SVP of Workplace Benefits at Principal Financial Group.
Third, the demand for financial wellness and income protection is reshaping benefit strategies. Accident and critical illness policies are increasingly viewed not just as insurance, but as tools for financial resilience—especially among younger workers who may lack emergency savings or paid leave.
Despite the growth, benefits managers face challenges. The supplemental market is crowded, with overlapping products and varying payout structures. Communicating value clearly—without overwhelming employees—is key. Brokers and HR teams are leaning into decision support tools, targeted education campaigns, and scenario-based storytelling to drive engagement.
Looking ahead, the U.S. supplemental health market is projected to grow from $40.58 billion in 2025 to $66.45 billion by 2034, expanding at a CAGR of 5.6%. Hospital indemnity insurance alone accounted for over 21% of revenue share in 2024, underscoring its role as a cornerstone product.
For benefits professionals, the message is clear: supplemental health products are no longer fringe offerings. They’re strategic components of a modern benefits portfolio—providing flexibility, financial protection, and a competitive edge in talent retention.
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