What Is a Hospital Indemnity Insurance Plan?

Hospital Indemnity Insurance – Hospital stays are expensive. No secret there. Even if you’ve got insurance, a short three-day hospital stay can cost a few thousand dollars out of your own pocket. A hospital indemnity plan is a great way to offset those costs. Plus, even though “hospital” is in their name, these plans offer much more than just hospital coverage.

In this article, we’ll explore how these plans work, what medical expenses are covered, and who should consider purchasing a hospital indemnity policy.

How does hospital indemnity insurance work?

Hospital indemnity insurance is not meant to replace your existing policy. Instead, it acts as supplemental insurance that complements your primary coverage. Instead of paying your provider or the facility, these plans pay you directly.

When you experience hospital confinement or other situations that we’ll talk about soon, you simply submit your claim to your hospital indemnity carrier, and they reimburse you based on the plan’s benefits.

For example, let’s say you had a 3-day hospital stay. If your plan includes a $300 daily reimbursement for up to six days, you’ll be paid $900. Then, you’ll still have three days to use later in the year if you need them.

Let’s look at some of the other benefits included in hospital indemnity plans.

What does hospital indemnity insurance cover?

All hospital indemnity plans are different, so you’ll need to compare coverage in each one to decide which will be best for your situation. To give you an idea of what you can expect, we’re going to review the coverage of one of our more popular plans here.

Basic Benefits

This plan has five benefits that are included in the base premium.

Hospital Confinement

You get to decide how many days you want to include and how much is paid for each day. For example, let’s say you have a Medicare Advantage plan that makes you pay $250 per day for the first five days of any hospital stay. It makes the most sense to choose at least five days of coverage at $250 per day. (You can choose more if you want!)

Observation Unit

There is a difference between “observation” and “inpatient admission.” This will have a significant impact on how your primary insurance plan pays a claim. Some do not cover hospital stays if they are for observation only. However, this plan pays for observation days the same way it would for a hospital confinement.

Emergency Room Benefits

Again, plans vary, but the plan we’re talking about pays $150 per day for up to four emergency room visits per year.

Transportation and Lodging

If your loved ones need to travel and have travel-related expenses like transportation, loading, and even meals, the plan pays $100 per day for ten days per year. You, as the insured member, must have been admitted to a facility that is at least 50 miles from your home for this to apply. All you have to do is submit receipts, and the plan will reimburse you.

Inpatient Mental Health

Inpatient mental health treatment will be reimbursed at $175 per day for up to seven days per year.

Optional Riders

Now let’s take a look at some of the riders you can add to this particular plan. Each one will have an additional premium based on the amount of coverage.

Ambulance Services

Whether by land, air, or sea, this rider pays $250 per day for up to four days per year and has a lifetime maximum of $2500.

Outpatient Therapy / Chiropractic Services

There are two benefits included in this one rider. For outpatient therapy (physical, occupational, or speech), the plan pays $50 per day for either 15 or 30 days. It also pays $50 per chiropractic visit, with up to five visits per year.

Skilled Nursing

You can choose to include anywhere between one and 50 days and can choose between $100, $150, or $200 per day.

Lump-Sum Hospital Confinement

This one is a little different than the basic benefit. This rider pays you either $250, $500, or $750 up to three times per benefit period. Again, this is regardless of any other coverage you have in place. It is tax-free money sent directly to you!

Lump-Sum Cancer

One in three people gets a cancer diagnosis during their lifetime. Yet this is probably the most overlooked aspect of insurance. This rider pays a lump sum upon your first internal cancer or malignant melanoma diagnosis. Benefits range from $1,000 to $10,000.

Outpatient Surgery

Cataract surgery is also included in this benefit. It pays out for two surgeries per year, at either $250, $500, $750, or $1000 each.

Urgent Care Center

Few of us can say we haven’t been to one of these! This rider pays $50 per visit for up to four days per year.

Who should purchase hospital indemnity insurance?

So, who should purchase one of these plans? As you can see, they offer so many benefits that they can be a good fit for anyone! That being said, there are two groups of people who would greatly benefit from one of these plans.

First, any Medicare beneficiary who has a Medicare Advantage plan should seriously consider hospital indemnity insurance. Every Medicare Advantage plan requires copays for the first three to six days of a hospital stay. Those copays can range from $250 to $600 dollars per day. A low-cost hospital indemnity plan will take care of those expenses.

Second, anyone with a high-deductible health plan would also benefit by enrolling in one of these policies. Reimbursements will help pay for that high deductible, which would significantly reduce your out-of-pocket medical costs.

If you’d like to learn more about the hospital indemnity plans we offer, give us a call! We can talk more about your options and provide quotes for base plans and any riders you’d like to add.