When people consider health care insurance, they think about the most common options.Usually this involves paying premiums into a major medical plan with a private insurer, but it can also include health savings accounts, flexible spending accounts, Medicare, Medicaid, and so on. What frequently goes overlooked is supplemental, or emergency, insurance, such as hospitalization insurance.
What is hospitalization insurance?
A hospitalization insurance policy, simply put, provides coverage for hospital stays due to illness, accidents, intensive care treatments, or other reasons as dictated by the policy. It provides benefits while you are in the hospital; this generally includes cash to cover related expenses, such as deductibles, pharmacy prescriptions, and other costs not covered by your day-to-day health insurance. Premiums are directly related to the cash you’ll receive in the case of a hospitalization.
How is hospitalization insurance different from a private health plan?
As you’re probably aware, private health plans have co-pays or deductibles for most, if not all, treatments. While these costs are often nominal for something simple like a doctor’s visit, deductibles for a hospital stay can easily run into the thousands. Private health plan deductibles can work in different ways: you may have to pay a certain amount in full before the plan pays anything, you may have to pay a percentage of the full bill, or the plan may make you do both.
Hospitalization insurance does not cover normal medical expenses, such as doctor’s visits or prescriptions received from your GP. It only covers hospital-related expenses. However, the fact most people rarely have to stay in the hospital makes this insurance quite inexpensive; several years of premium payments can frequently pay for themselves and then some in the course of a single hospital visit.
I have a high-deductible private health plan. What does this mean when I or my child have to go to the hospital?
Unfortunately, it probably means you’ll pay quite a bit of money.
The deductible itself varies by plan, but all high-deductible health plans in the United States have a minimum deductible of $2,700 for families. Thus, even in the best case scenario, you’ll need to pay $2,700 in hospital costs before the insurance company chips in a penny, and many plans have much higher deductibles.
In many cases, paying the deductible doesn’t mark the end of the hospital bills. As mentioned in the last section, some health plans (especially high-deductible ones) require patients to pay a percentage of their bills even after the deductible is paid. In these cases, patients continue to receive bills up to the out-of-pocket maximum, as dictated by the plan or federal law.
Here’s an example: Timmy’s a great skateboarder, but he catches the lip of the ramp wrong and ends up breaking his leg. He’s in the hospital for three days, and while he’s recuperating, you’re dealing with the health insurance company.
You have a $5,000 deductible. That means, on top of the premiums you already pay, you have to pony up the first $5,000 for bills related to this visit. (Deductibles are generally for the year, so if Timmy breaks his other leg two months later, you won’t need to pay this again… but let’s hope that doesn’t happen.) Five thousand dollars is a lot of money, but given the expense of a hospital visit like this, you might think, well, that’s not terrible.
However, your plan also includes a stipulation that you’re responsible for twenty percent of all future bills up to the government-mandated maximum of $13,300 for out-of-pocket costs. That means, for every $1,000 the hospital bills the insurance company, you pay $200, up to the $8,300 left until you reach the cap ($13,300 minus $5,000). Thus, if the bills total another $41,500—which is likely for a three-day hospital stay—you’re paying $13,300 on top of your health insurance premium to make sure Timmy is cared for.
Of course, the plan’s not worthless; it saved you tens of thousands of dollars compared to having no insurance at all. The reason high-deductible plans exist is so people can possess health insurance that will at least limit their costs if something catastrophic happens, which is the situation here.
However, accidental injury insurance for a healthy family runs only $20-40 per month. If we assume $30 per month, thus $360 per year, it would take thirty-seven years to pay premiums equal to the out-of-pocket costs for Timmy’s hospital stay, even with that high-deductible health plan. And after thirty-seven years, Timmy should be long gone from living in your basement.
What’s different if I have hospitalization insurance?
This depends on your exact plan. Generally speaking, however, a hospitalization policy dictates how much you’ll receive in a lump sum should you or a beneficiary of your policy be admitted to the hospital, If that happens, you are paid the full sum, regardless of whether your expenses reach that level.
The real benefit of this for families on a high-deductible health plan is that you know, in a given year, your out-of-pocket expenses are capped by law. As mentioned above, the total is $13,300, but it changes slightly each year; know what it is and you can make sure the benefit from your hospitalization insurance will always meet your expenses. That gives you better control over your finances and greater peace of mind.
Who does a hospitalization policy benefit?
Whoever you want it to benefit. For example, at the bottom of this page is a calculator that will estimate premiums for similar policies based on who will be covered—you, your spouse, your children—and your age. Note that who you add to the policy changes the price in different ways depending on the policy chosen; for example, adding children only costs a few dollars per month since they’re less likely to get sick, but more for accidental injury (Timmy’s going to get right back on his skateboard). You can also ask the site for a more precise quote on hospitalization insurance, and make sure everyone you want covered will receive all the care they need.