What Is a Carve-Out Insurance Plan?

Managed Care Magazine explains that a carve-out insurance plan is a plan that is intended to cover a particular service or treatment of a specific disease. A carve-out insurance plan is a supplement to a person's standard health insurance plan. The carve-out plan is provided by a third-party vendor, and it covers specialized care or products, such as prescription medications and treatment for chronic illnesses.

New York Life notes that providing a carve-out plan can be more cost-effective for employers and provide better benefits to employees. An employer who selects a carve-out plan can offer it to all employees or limit it to a certain group of employees, such as executives. For instance, an employer who provides life insurance coverage to employees under a term life plan may be limited by the group policy with how much coverage each employee can obtain. A carve-out life insurance plan can allow a group of employees to obtain an additional life insurance plan, such as a permanent life insurance policy for executives.

Managed Care Magazine points out that a carve-out insurance plan can provide products and care that might be deemed too expensive under a traditional group insurance plan at a lower premium cost. A carve-out insurance plan can provide for highly managed care to participants who struggle with chronic diseases, behavioral health issues and specialty pharmacy needs.