Medical Gap Insurance Adoption is on the Rise: Closing Coverage and Knowledge Gaps for Employers

The rising cost of healthcare has become one of the biggest challenges facing employers today. For many organizations, high-deductible health plans (HDHPs) have become a necessary tradeoff — helping keep premiums in check, but leaving employees exposed to higher out-of-pocket costs.

According to KFF’s 2024 Employer Health Benefits Survey, about a quarter of firms offering health benefits now provide an HDHP paired with a savings option. While this shift helps employers manage premiums, it has created an unintended consequence: employees are shouldering a larger share of upfront medical expenses. This is where medical gap insurance is gaining attention, but where tremendous opportunity for adoption still lies.

The lesser known but growing category

Medical gap insurance is designed to “bridge the gap” between what a major medical plan covers and what employees must pay out of pocket. It covers services such as inpatient hospital stays, outpatient surgeries, diagnostic imaging and, depending on plan design, may include office visits or prescriptions.

Despite the potential benefits, awareness of gap insurance remains relatively limited compared to other supplemental health products such as critical illness, accident, hospital indemnity, and cancer insurance. While brokers are generally aware of medical gap insurance, it is not as widely adopted or recognized as these other products. Some employers, and even some insurance brokers, may not be fully familiar with how it works or may assume it’s too complicated to administer. As a result, there’s significant opportunity for growth, particularly among small to mid-sized employers who are under the most pressure to offer competitive benefits without absorbing unsustainable costs.

Why employers are taking a second look

The current labor market has compelled employers to carefully consider how to strike a balance between cost containment and benefit design. In a 2025 Employee Benefits Survey conducted by the Society for Human Resource Management (SHRM), health coverage continues to rank as one of the most essential benefits in terms of employee satisfaction and retention. When a plan feels inadequate – because of a $3,000 or $5,000 deductible, for example – the perceived value of the benefit erodes.

Medical gap insurance helps restore that balance. By layering coverage that mirrors the underlying medical plan, employers can soften the financial impact of high deductibles without overhauling their benefits strategy. For employees, this can mean fewer instances of deferring or delaying care due to cost concerns — a growing issue linked to poorer health outcomes and higher long-term costs. Combined with a simple claim process that can pay participating healthcare providers directly, there’s no need for employees to file claims or wait to get reimbursed, helping employees to access care when they need it.

Emerging employer priorities 

Based on current market trends, three priorities are shaping how employers, brokers, and carriers think about supplemental benefits: 

• Managing escalating healthcare costs without cutting benefits – U.S. workers identified total rewards, including health benefits, as their top priority, with 42% citing financial security concerns amid inflation and economic uncertainty. HR professionals are increasingly focused on maintaining competitive benefits packages despite budget constraints.
• Offering customizable, flexible coverage to help meet diverse workforce needs – The SHRM report underscores the need for tailored benefit solutions, noting that a one-size-fits-all strategy is neither practical nor effective in today’s evolving workplace. HR professionals are prioritizing flexible approaches to meet the diverse needs of their workforce.
• Simplifying the claims process to help reduce administrative strain – Effective HR technology is strongly correlated with positive employee perceptions and HR effectiveness. Streamlined digital tools, including benefits management platforms, are increasingly seen as essential for reducing administrative burden and improving the employee experience. 

The role of brokers and advisors

Medical gap insurance is not a silver bullet. It doesn’t replace the need for careful planning design or broader conversations around healthcare affordability. For employers, medical gap insurance can be a practical and cost-effective solution to enhance their benefits offering and help protect their workforce from unexpected medical expenses.

For mid-sized employers, medical gap insurance can make the difference between offering a high-deductible plan with financial risk shifted heavily onto employees and offering a plan that feels protective and competitive. Employers who explore and implement medical gap insurance options demonstrate a commitment to employee well-being, strengthening their reputation as thoughtful and competitive benefits providers.

Looking ahead

As healthcare costs continue their upward trajectory, the need for innovative benefit strategies will only grow. Employers that once dismissed supplemental products as “extras” are beginning to recognize their role in helping to keep employees financially secure while maintaining their own attractive benefits packages.

The trajectory for medical gap insurance is clear. More brokers are introducing it, more employers are adopting it, and more employees are benefiting from the added protection. The next step is making sure awareness keeps pace with need. This requires empowering employers with clear information, streamlining administrative processes, and offering products that are both flexible and easy to use, making it simpler for organizations to support their teams effectively.

Done well, medical gap insurance can help employers walk the fine line between cost control and care access — one of the most pressing balancing acts in today’s healthcare landscape.

Photo: Feodora Chiosea, Getty Images

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