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What is hospital indemnity insurance?
While health insurance pays for medical services after copay fees, co-insurance and deductibles are met, hospital indemnity insurance pays the policyholder if they are hospitalized.
As deductibles, co-insurance and copay fees become increasingly expensive, more people and even employers are turning to hospital indemnity insurance to cover their out-of-pocket expenses if they are hospitalized.
Some employers who cannot afford lower deductible policies for their employees are including hospital indemnity insurance or health indemnity insurance as an added benefit to offset the cost of high deductibles.
These plans help keep costs down for employees and are less expensive for employers to provide than lower deductible plans.
While these gap plans have helped cover medical costs and are valued by many, they aren’t without their drawbacks.
Critics point out health indemnity insurance plans are not regulated by health care laws, which means the insurers can do things that are prohibited by the Affordable Care Act, such as deny coverage for pre-existing conditions.
While hospital indemnity insurance only provides coverage in the event of hospitalization, other types of health care indemnity policies pay the policyholder when they experience other medical events, such as being transported by ambulance, having surgery or receiving a diagnosis of specific illnesses.
Hospital indemnity insurance example
Ann and her family receive health insurance through her employer’s plan. Her deductible is $1,500 per person or $3,500 for the entire family of four.
To help cover expenses should one of the family members be hospitalized, Ann and her husband shop for a hospital indemnity policy. They purchase a policy for $30 per month that will pay $250 per day if one of the family members is hospitalized.
Two years later, Ann is hospitalized for 10 days for complications from surgery. The plan pays her $2,500. This covers her deductible and helps offset the costs of the additional expenses incurred.
Are you anticipating high health care costs? Learn more about smarter ways to pay medical bills.