So what gives? The ACA was supposed to help more people gain access to affordable healthcare, right?
The study researchers attribute the problem to “inadequate healthcare insurance,”[1] meaning that the qualifying health coverage most people can afford or that their employers provide still leaves them exposed to high out-of-pocket costs.[2]
On top of inadequate coverage, only about 40% of Americans have access to $1,000 to cover an unplanned expense (like a health insurance deductible).[3]
But if you have some amount of savings, maybe even $1,000, you’re in the clear, right? Not so fast.
Even with $1,000 in savings, you may still find yourself paying more than you want to out-of-pocket if you need to higher-cost healthcare services, including hospitalization. Consider that the average deductible for individual health insurance in 2020 is $4,683,[4] while the average deductible for employer-sponsored health insurance in 2019 was $1,655.[5]
In 2018, the average hospital stay in the U.S. cost $2,335 per day.[6] Even hospitalization for relatively common health conditions come with serious price tags. For example:
- Pneumonia: from $5,016 to $15,675 or more[7]
- Inflammatory bowel disease: from $5,153 to $16,103 or more[8]
- Back pain: from $6,706 to $20,955 or more[9]
If saving $2,000 to $5,000 in an emergency fund for your major medical deductible or other out-of-pocket costs isn’t possible, another way to access supplemental funds may be to enroll in hospital indemnity insurance.
In the remainder of this blog post we’ll talk more about:
- What hospital indemnity coverage is
- What hospital insurance typically covers and excludes
- How an indemnity plan works (with examples)
- When hospital insurance might be a good idea
What is hospital indemnity insurance?
Hospital indemnity insurance pays a fixed-benefit at set intervals, such as per day, week, month, visit or event, rather than a percentage of the bill, for covered hospital stays and services.
It should be considered a supplement to, rather than a replacement for, major medical insurance and can help cover out-of-pocket costs. This can be especially important if you haven’t reached your annual major medical deductible.
Hospital indemnity plans are not regulated by the Affordable Care Act, which means they don’t have to offer the mandated ACA essential health benefits, are not considered to be minimum essential coverage, and are typically not guaranteed issue — though some plans may be “guaranteed renewable.”
There is also no open enrollment period for hospital indemnity plans, so you can enroll any time of year. However, it’s important to note that in some states you must have an ACA-qualifying major medical plan in order to enroll in a supplemental hospital plan. Plus, some hospital indemnity plans have waiting periods for hospitalization related to an illness, but not for an accident.[10]
The monthly premium for a hospital indemnity plan typically will depend on the amount of coverage you select, as well as your age, gender, and health. Monthly premiums for a plan that covers less can be as little as $5. A plan that covers more services can cost more, from $27 per month.[11]
What Does Hospital Indemnity Insurance Typically Cover?
While patients can use hospital indemnity benefits however they want, payments are tied to specific medical events and services.
Coverage is typically provided for:[12]
- General hospital stays (with or without surgery)
- Intensive care stays
- Critical care unit stay
- Outpatient surgery
- Continuous care
- Outpatient X-rays and laboratory services
- Outpatient diagnostic imaging
- Ambulance services
- Emergency room visits
- Physician office visits
- Emergency treatment
Some hospital indemnity plans include coverage for critical illnesses, such as cancer, heart attack, or a stroke. Other plans allow you to add these benefits for an additional cost.
Pregnancy
If you’re pregnant or planning to become pregnant, be sure to carefully check any hospital plans you’re considering, specifically the list of exclusions and what constitutes a pre existing health condition. Hospital indemnity plans do not have to provide coverage for healthcare services related to pregnancy, like qualifying major medical plans do.[13]
Remember, even with a hospital indemnity plan that doesn’t exclude pregnancy-related costs for covered services, you’ll still want a qualified major medical plan to help with costs associated with routine and preventive maternity, postpartum and pediatric care.[14]
Learn more about Hospital Indemnity Insurance.
How Does Hospital Indemnity Coverage Work?
Let’s look at some examples of how hospital indemnity insurance might work in both an outpatient and inpatient situation. Both hypothetical examples are for hospital indemnity insurance only, and do not take into account any major medical benefits that may be involved.
Actual hospital indemnity benefits will typically vary based on the plan and options you select, as well as your specific medical situation.
Let’s take a look at a couple of hypothetical examples for outpatient and inpatient hospital indemnity coverage.
Outpatient
You need laparoscopic gallbladder surgery (It was not a pre-existing condition). The procedure is performed at an outpatient surgical facility with no overnight stay.
If you purchased a hospital indemnity plan with a $1,000 per injury or illness deductible and the coverages as shown in the table below, your policy would pay $2,900 in benefits.
| Benefit covered by your hospital indemnity plan | Amount |
| Outpatient surgery facility benefit | $1,200 |
| Outpatient surgeon benefit | $1,800 |
| Outpatient assistant surgeon benefit | $360 |
| Anesthesiologist benefit | $540 |
| Benefits payable before per injury or illness deductible | $3,900 |
| Less per injury or illness deductible | ($1,000) |
| Total benefits paid | $2,900 |
Inpatient
You are admitted to the hospital with pneumonia and stay for three days. Again, the condition is not pre-existing. A policy with a $0 per injury or illness deductible and the following coverages results in $6,150 in benefits.
| Benefit covered by your hospital indemnity plan | Amount |
| Daily inpatient hospital confined benefit | $6,000 ($2,000 per day x 3 days) |
| Doctor visits while hospital confined benefit | $150 ($50 per day x 3 days) |
| Benefits payable before per injury or illness deductible | $6,150 |
| Less per injury or illness deductible | $0 |
| Total benefits paid | $6,150 |
In both examples, you can then use the total benefits paid however you wish, whether to pay your major medical plan’s deductible, to help cover other medical costs not covered by your major medical plan (like out-of-network care) or to pay for expenses like transportation, lodging or parking.
When is Hospital Indemnity Insurance a Good Idea?
How do you know if a hospital indemnity plan might be worth the extra premium cost? Even if you have a major medical policy, there are circumstances where supplemental hospital indemnity coverage may be a good idea, including if:
- Your major medical plan has high out of pocket costs or you have a high deductible health plan.
- You’re planning on having a medically necessary elective surgery (such as a knee replacement in which you control the timing).
- It makes sense financially — for example, if the monthly premium you qualify for is relatively low, you don’t have cash reserves on hand, and you have high out-of-pocket costs on your major medical plan.
- You have a major medical plan with a narrow network, which can result in higher out-of-pocket costs even with your comprehensive policy.
If you’re over 50 or have a pre-existing condition it may be harder to qualify for a hospital indemnity plan since these policies are underwritten.[15]
Summary + Next Steps
Even with a major medical policy you may still find yourself facing high out-of-pocket costs (deductible, copay, and coinsurance).
If you are looking for extra financial protection against the unexpectedly high costs of hospitalization, then a hospital indemnity plan may be worth considering, especially if you have a high-deductible major medical plan.
To learn more about hospital indemnity insurance and ask specific questions, call (888) 855-6837 to speak with a licensed agent.
