People may have different opinions about healthcare in the U.S., but you probably won’t hear too much dissension about one aspect: the cost. The United States currently ranks highest in healthcare spending among the developed nations of the world.
Traditional Health Insurance
It’s easy to underestimate the cost of medical care. The national average cost for a day’s stay in a hospital is a whopping $10,400 per day; because the average hospital stay is 4.5 days, you’d be facing a $46,800 bill when you’re discharged. Health insurance (aka major medical) can help protect you from high costs like this. Most health insurance will cover a certain portion of a hospital stay, but you could still be responsible for the costs your health insurance coverage doesn’t cover. These costs could be significant, especially in the event of an extended hospital stay or one involving specialized treatment.
Almost half of Americans depend on their place of employment for their health insurance. This coverage is important in the event of a serious illness or accident, whether your health insurance is through your employer, your spouse’s, or if you obtain it privately. Those who don’t have primary health insurance are vulnerable to debt or bankruptcy due to the astronomical price of health care. More than half a million American families resort to bankruptcy each year because of medical issues and bills.
How would you pay a hefty bill associated with a hospital stay?
Hospital Indemnity Insurance
Hospital indemnity insurance, also known simply as hospital insurance, is supplemental insurance coverage that provides a cash benefit if you are confined to a hospital due to an illness or serious injury. Like other types of supplemental insurance, it is meant to help you pay for services not covered by your regular health plan, which pays for medical services after copays, co-insurance, and deductibles are met. Hospital indemnity plans have become increasingly popular to help fill the gaps that can be left by regular health insurance, especially high-deductible health plans. Hospital indemnity insurance pays if you are hospitalized in addition to any other insurance coverage you may have. This type of policy pays directly to you, not the hospital, and can be used in any way you wish whether related to your hospital stay or not.
Every hospital indemnity plan is different. Examples of the types of benefits hospital indemnity plans may offer are a fixed benefit amount for admission to a hospital, a fixed benefit amount for an overnight stay, and a fixed benefit amount for an overnight stay in an intensive care unit.7 Some hospital indemnity plans may allow you to add family members to your policy. If you think you may want to do that, be sure to check the terms of the policy up front before you buy it to make sure you have this ability and determine if there are any eligibility requirements, etc.
Remember, hospital indemnity insurance doesn’t pay medical bills from doctors or the hospital, and it won’t pay for prescription medications. You may choose to use the benefits paid to you by a hospital indemnity policy to pay for these items or any other purpose you want; for example, expenses you may have as the result of not being able to return to work.
Do I need it? Is it worth it?
While you’re asking those two questions, ask yourself these as well:
- How likely is it that I (or a family member) will be hospitalized? If a hospital stay is likely, a hospital indemnity plan could be a good choice for you; however, if your health is poor, it could be difficult (or not possible) to qualify and expensive.
- How comprehensive is my primary health insurance? If the answer is “not very,” or if you do not have health insurance, a hospital indemnity plan may help fill the gaps in your health insurance coverage, or if you have none, provide a limited amount of coverage.
- Do I have emergency funds available to cover unexpected expenses? 28 percent of workers making $50,000-$99,999 usually or always live paycheck to paycheck, and 70 percent are in debt.9 Only 56 percent save $100 or less a month.8
- Can I afford it? Weigh the amount you will pay in premiums over time against the potential benefits you might receive.
Do your research. Ask the right questions. Study the benefits and limitations of various hospital indemnity policies. Weigh your options carefully. A licensed insurance agent can help guide you to coverage that makes sense for you.