The following is adapted from Healthcare is Making Me Sick: Learn the Rules to Regain Control and Fight for Your Healthcare.
You’ve just purchased a health policy and had to increase the deductibles and out-of-pocket costs to afford the monthly premium. You’re not sure where you’re going to come up with the money, but you felt like you had no alternative based on the costs of the lower-deductible plans. Sure, your insurance will kick in after you meet that deductible, but what do you do if you can’t meet your deductible in the first place?
When shopping for insurance, it’s easy to overlook that deductibles represent real money out of your pocket. Your grocery bills, mortgages, and car payments don’t stop just because you have a medical expense you need to cover. In this article, we’ll talk about filling in those gaps in coverage with supplemental policies.
Why Consider a Supplemental Policy?
These are not healthcare policies and should not be considered as a replacement for one. They may make sense, depending on your budget and health concerns, to offset the effects of a catastrophic illness on your finances. You’ll wonder, “Where do I get the money to cover the deductibles and out-of-pocket costs of my insurance plan caused by medical expenses? If I’m not working because I’m sick, how do I cover those costs?”
Supplemental policies offer you direct cash payment in the event you have a critical illness, hospital stay, or accident. They can be purchased directly from the insurance carriers or agents and are often offered through your employer.
Programs can be designed to meet your specific needs and affordability, and they can provide peace of mind. They are not reduced or coordinated with other health insurance you own and are generally extremely affordable—usually under $50 a month.
Supplemental policies have become increasingly popular due to the escalating premium costs that have driven most of us to higher-deductible plans.
Different Types of Coverage
If you have a lower out-of-pocket healthcare plan, you likely don’t need a supplemental plan. In other words, if your deductible is $500, why buy a $5,000 cancer policy?
The direct payments can be purchased at different levels, allowing you to fit them to your specific needs. Underwriting requirements are nominal for basic levels of coverage. Pre-existing exclusions do apply to individuals with an existing condition. There are basically three types of coverage: critical illness, accident and hospital, and medical indemnity plans. Let’s look at each type of coverage in more detail.
Critical illness covers expenses resulting from specific diseases. The benefit amount is paid in a lump-sum payment when you are diagnosed with that named disease. The most common illnesses covered in this category are as follows:
- Heart Attack
- Organ Transplant
- Heart Transplant
- Kidney Failure
- Coronary Bypass Surgery
- And more
You can purchase coverage as low as $5,000 per disease up to $50,000 by answering basic health questions. Amounts over $50,000 require full medical underwriting. Costs range from $50 to $150/month depending on your age and the coverage amount.
Accident and health coverage simply means plans that pay covered expenses related to accidents. They’re paid in a lump-sum payment to you to use as you deem appropriate and are not limited to, or coordinated with, other medical coverage you have. Covered conditions can include the following as long as they are due to an accident:
- Second- and Third-Degree Burns
- Ruptured Discs
- Torn Knee Cartilage
- And more
Hospital indemnity covers expenses for hospital admissions, allowing a daily rate up to a maximum number of days and dollars. You can purchase daily benefits of $100–$1,000 per day for a period of up to 180 consecutive days.
Coverage for the following is included under this type of plan:
- Intensive Care Units
- Emergency Room Visits
- Qualifying Outpatient Visits
- And more
Major Players in the Supplemental Market
Plans like those I’ve described are becoming more popular as deductibles and out-of-pocket costs rise. So, more insurance companies are now offering those plans. Newcomers in the field are the major health carriers—Aetna, Cigna, Humana, Blue Cross Blue Shield, and United Healthcare—which are now offering the coverages in addition to their comprehensive, ACA-compliant health insurance offerings.
The following companies, alternately, have been offering these coverages for decades: Aflac, Mutual of Omaha, Colonial Life Insurance Company, Principal Financial Group, Assurity Life Insurance, Co-American Fidelity, Assurance, Guardian Life Insurance Company of America, Assurant Health Company, Combined Insurance, and AIG.
Critical illness, accident and hospital, and medical indemnity coverages should be considered when creating your total healthcare insurance package. You may be able to select a higher-deductible health plan at a lower premium and purchase one of these programs for less than the cost of buying a lower-deductible health plan.
Don’t Overinsure Yourself
Only buy the amount of coverage that covers your deductible and out-of-pocket expenses before your health insurance plan pays 100 percent. Only purchase the plan if one of these plans and your health insurance plan combined is less than a lower-deductible health insurance plan. Otherwise, you are overinsured.
For more advice on supplemental policies, you can find Healthcare is Making Me Sick on Amazon.
Scott Heiser has more than twenty years’ experience as a consultant for clients in the insurance and healthcare system. Scott was a partner and owner of a commercial insurance brokerage, in which he led and developed an employee benefit practice that managed more than half a billion dollars in health benefits. Scott is a strategic innovator who knows the ins and outs of what can feel like the overwhelming world of healthcare and insurance. Today, he is dedicated to sharing his knowledge to help educate and empower his readers. His goal is to improve your health outcomes while lowering your costs. To get started, visit www.UncoveredHC.com.