We've spent time breaking down the individual components of Catastrophic Health Insurance as it is presented to Texans today on our blog. Current policies being offered are comprised of three individual parts that can be purchased individually.
- Critical Illness
- Accident
- Hospital Indemnity
The first two line items operate very similarly while covering very different items. The Hospital Indemnity portion of the plan has a very different function than the other two. Today, we take a look at what exactly a Hospital Indemnity plan is and how it benefits you, the insured.
Hospital Indemnity Definition
An indemnity plan by definition pays you, the insured, a defined dollar amount for specified services or encounters. Those services and encounters are spelled out in the policy definitions along with the amount of money that you will receive when they occur. In days gone by, that amount of money would have covered the cost of those services. That's how this kind of policy got started. But as the costs of health care delivery increased for Texans and the ambiguity of billable amounts escalated, the ability of the indemnity plan to cover those costs became incredibly problematic. As a result, using them as insurance plans fell by the way side for most people.
How Do Hospital Indemnity Plans Benefit Policy Holders Then?
When looking at the critical illness and accident portions of this plan, you suddenly realize that there is exposure to costs via the deductible and coinsurance portions of the coverage. The insured is responsible for paying the initial deductible prior to the insurance plan kicking in for the covered amount. This money can be anywhere from $500 to $5,000. Once that is satisfied and the health insurance company begins paying their portion of the covered amount, the insured is still left with paying the coinsurance portion of that amount. If you are responsible for 20% of a total covered amount of $100,000 plus the original deductible, your cash requirement would potentially be $20,500 to $25,000. I don't care who you are, that's A LOT of money. The great news is that the hospital indemnity plan can kick in and eat back that money for you. But how? Let's use an accident situation to help understand.
I'm a cyclist with a mountain biking problem. I love to be on two wheels on a dirt trail. But those trails are littered with rocks, roots and obstacles. Those obstacles will sometimes try to jump up and trip the rider up. I've had a few crashes in my day. Let's assume I break my femur and wind up in an ambulance to the ER and require a week in the hospital since the break required surgery. YIKES! No one wants that bill. But I do have my catastrophic health insurance policy which contains that accident policy and hospital indemnity plan.
The Math
So my bike accident resulted in a total bill of $75,000 after the ambulance, ER, surgery, and post operation stay. The initial deductible for the accident policy is $1,000. The covered amount left is $74,000, of which I am responsible for 20% via the coinsurance provision. That means I am financially responsible for $14,800 in coinsurance and $1,000 for the deductible for a grand total of $15,800 in personal responsibility.
The hospital indemnity portion of the policy pays me at $2,000 per day in the hospital along with $6,000 for the surgery. Since I was in the hospital for a week, I will receive $14,000 (7 days @ $2,000 per day) plus the $6,000 for the surgery. That is a total of $20,000 to cover my personal responsibility portion of $15,800. What happens to the other $4,200 is what I am sure you are asking. That money goes back into your pocket to cover any extra expenses that might arise from your accident. That is why the hospital indemnity is a key cog in this trifecta of protection! This is why we believe in all three legs of the catastrophic health insurance policy.
If you need help with navigating the waters of individual health insurance, schedule a consultation with one of our agents today. Insurance for Texans is committed to helping you have the best protection possible at the best price. And remember, we work for you and not some big insurance company.