What are ancillary benefits?

When it comes to offering health benefits to your employees, you have many choices. While certain options, like group health insurance, are standard, there are other perks you can offer in addition to your plan.

Ancillary benefits are supplemental employee benefits offered alongside major medical coverage. They typically include insurance products like dental, vision, life, and disability coverage. They can also include voluntary benefits and lifestyle-focused offerings, such as child care assistance, mental health benefits, and employee stipends.

So, why should you offer them to your employees? In this article, we'll explain how ancillary benefits work.

In this blog post, you'll learn:

• How ancillary products complement traditional health insurance.
• Why ancillary benefits can improve employee satisfaction, employee loyalty, and retention.
• Common types of ancillary benefits.

Why offer ancillary coverage to your employees?

It's beneficial to offer an ancillary policy to your employees to attract and retain top talent.

In today's competitive labor market, employees increasingly evaluate the entire benefits package, not just salary. According to PeopleKeep by Remodel Health's Employee Benefits Survey, 81% of employees said an employer’s benefits package is an important factor in whether they accept a job.

Offering ancillary benefits can improve employee satisfaction, strengthen employee loyalty, and help employers attract and retain top talent.

Other potential benefits of ancillary plans include:

• Providing peace of mind to employees
• Reducing the cost of your group health insurance policy if you switch to a high deductible health plan (HDHP) and couple it with supplemental coverage
• Access to preventive care services can help employees address health concerns early, potentially reducing healthcare costs and minimizing time away from work
• Supporting your employees' financial wellness

How to offer ancillary benefits

If your organization is looking to offer ancillary benefits to supplement a group health insurance plan, you have several options to choose from.

Some of the most popular ancillary benefits are:

• Life insurance
• Critical illness insurance
• Vision insurance
• Dental insurance
• Disability insurance
• Accident insurance
• Pet insurance
• Health savings account (HSA) (for those with an HDHP)
• Flexible spending account (FSA)
• An integrated health reimbursement arrangement (HRA)
• Employee stipends

We'll look at a few of these types of coverage in more detail below.

Life insurance

Life insurance is a popular ancillary benefit. A group life insurance policy helps your employees provide for their families in the event of their sudden or accidental death. For life insurance claims, your employee's beneficiary would receive money to maintain their quality of life. Life insurance also helps pay for funeral expenses.

Critical illness insurance

Critical illness insurance is another common type of ancillary benefit you can offer your employees.

The policies vary, but most of them provide coverage for medical emergencies like:

• Heart attack
• Stroke
• Cancer

In these situations, your employee would receive a lump sum to help cover their medical bills or replace lost wages while they recover from their illness.

Pet insurance

Many people consider their pets as members of their family. For that reason, employers are starting to offer pet insurance coverage as an employee benefit to offset the cost of high vet bills. Most pet insurance plans have no network providers, since they operate on a reimbursement model. Since your employees pay the vet bill upfront and submit a reimbursement claim, they can typically use any vet, animal clinic, specialist, or emergency clinic they choose. But some carriers may offer preferred provider options.

Health reimbursement arrangement (HRA)

An HRA is a health benefit that allows you to reimburse your employees for qualifying medical expenses. HRAs are tax-free for both the employer and the employee, making them a great health benefit option.

While HRAs are sometimes used in place of traditional group health insurance plans, you can also use them alongside a group health plan.

You can offer a group coverage HRA (GCHRA), also known as an integrated HRA, alongside a group health plan. With a GCHRA, you can set a custom monthly allowance for reimbursement toward out-of-pocket medical expenses that your insurance plan doesn't cover.

The most common reimbursements approved under a GCHRA are out-of-pocket expenses, such as:

• Copays
• Coinsurance
• Deductibles

While a GCHRA supplements a traditional group health plan, employers can also offer stand-alone HRAs. With an individual coverage HRA (ICHRA) or a qualified small employer HRA (QSEHRA), employers can reimburse employees tax-free for individual health insurance premiums and other qualified medical expenses.

Employee stipends

Another way to add ancillary benefits to your existing group health insurance plan is to offer employee stipends.

Employee stipends are a fixed sum of money provided to your employees to help them pay for various expenses, including healthcare and wellness costs.

Unlike HRAs, employee stipends are generally taxable and aren't subject to IRS rules governing qualified medical reimbursements. Employers will need to add stipend amounts to employees’ W-2s as income. However, their flexibility allows employers to support a broader range of employee needs.

Employee stipends are highly flexible. You can provide them to any employee, regardless of their health insurance status, location, or type of employment.

You can offer your employees a health stipend to supplement your group health insurance plan. This allows your employees to use their monthly allowance on medical services not covered by insurance, such as out-of-pocket expenses or office visits.

To take your benefits package one step further, you can also offer wellness benefits.

With a wellness stipend, you reimburse your employees for their expenses, such as:

• Gym memberships
• Fitness classes
• Mental health apps

Allowing your employees to improve their overall well-being helps them stay healthy and more productive at work.

Conclusion

Supplemental benefits help to fill the gaps left by major medical insurance coverage. Offering ancillary health insurance can help your organization attract new talent and retain employees by boosting your existing employee benefits package. Ancillary benefits can include vision or dental insurance, life insurance, and personalized benefits such as HRAs or employee stipends.

If you want to add flexible ancillary benefits to your employee benefits package, PeopleKeep by Remodel Health can help! Our HRA and employee stipend administration software makes it easy to offer personalized benefits to your workforce.

This article was originally published on April 13, 2022. It was last updated on June 9, 2026.