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We all know that a single night in the hospital can be enough to strain many households’ finances, but consider this:
While a lot of us may be at least vaguely familiar with the term, a lot of us aren’t exactly sure what a hospital indemnity plan is or does.
Hospital indemnity plans are considered fixed indemnity coverage, which means they provide completely separate benefits from your major medical insurance (i.e., Obamacare) plan. When you incur covered medical expenses resulting from hospitalization, surgery, chemotherapy and radiation services, your HIP will pay a fixed benefit (i.e., a set amount). That amount may be per day, per week, per month, per visit or per event, depending on the plan and the benefit that applies.
In the simplest of terms, a hospital indemnity plan is coverage that provides specified fixed-dollar-amount benefits for covered hospital services and durations, regardless of the actual cost of the service. HIP policies are standalone, which means they do not coordinate with your other health insurance coverage.
Some hospital indemnity plans cover additional services such as ambulance trips, second surgical opinions, and even chemotherapy and radiation. Optional health maintenance and diagnostic testing benefits that pay a fixed amount for preventive care, X-rays, urgent care and other services may also be available with some plans. As with any healthcare product, the options and benefits available to you will vary by plan.
We’ve established what hospital indemnity coverage is, but let’s look at a couple of examples illustrating the practical use of indemnity benefits.
Don is admitted to the hospital with pneumonia and acute respiratory failure. His stay lasts five days, two of which are in the intensive care unit. His condition was not pre-existing.
Don has purchased a hospital indemnity plan with a $0 per injury or illness deductible.
This is how his claims benefits break down:
|Benefits covered by Don’s hospital indemnity plan||Amount|
|Daily intensive care benefit||$6,000 ($3,000 per day x 2 days)|
|Daily inpatient hospital confined benefit||$6,000 ($2,000 per day x 3 days)|
|Doctor visits while hospital confined benefit||$250 ($50 per day x 5 days)|
|Benefits payable before per injury or illness deductible||$12,250|
|Less per injury or illness deductible||$0|
|Total benefits paid||$12,250|
Susan undergoes laparoscopic gall bladder surgery. The procedure is performed same-day at an outpatient hospital surgical facility. Her condition was not pre-existing.
Susan has purchased a hospital indemnity plan with a $1,000 per injury or illness deductible.
Benefits covered by Susan’s hospital indemnity plan
|Outpatient surgery facility benefit||$1,200|
|Outpatient surgeon benefit||$1,800|
|Outpatient assistant surgeon benefit||$360|
|Benefits payable before per injury or illness deductible||$3,900|
|Less per injury or illness deductible||($1,000)|
|Total benefits paid||$2,900|
Again, your actual hospital indemnity benefits will vary based on the plan and options you select as well as your specific medical situation.
Hospital indemnity plans are not major medical insurance and do not replace ACA-compliant coverage. As such, HIP is not subject to the Affordable Care Act, which means you can be denied coverage based on your health history. If you are not exempt from the individual shared responsibility provision (i.e., individual mandate) and purchase HIP instead of an ACA-compliant health insurance plan, you could owe a tax penalty.
However, hospital indemnity plans provide benefits to help with out-of-pocket expenses.
Only you can determine whether or not hospital indemnity coverage will be a valuable addition to your healthcare benefits. If you are interested in additional benefits to pay for hospitalizations or outpatient surgeries, HIP may be worth your consideration.
Working with a health insurance professional may help you decide. This fixed-dollar-amount hospital indemnity coverage is available exclusively to members of America’s Business Benefit Association (ABBA).
To learn more about hospital plans and ask specific questions, call the number on your screen to speak with a licensed producer or find a local agent who can discuss hospital indemnity options with you.
 The Henry J. Kaiser Family Foundation. “Hospital Adjusted Expenses Per Inpatient Day By Ownership.” 2014. http://kff.org/other/state-indicator/expenses-per-inpatient-day-by-ownership/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D
 Rae, Matthew, et al. “Patient Cost-Sharing in Marketplace Plans, 2016.” The Henry J. Kaiser Family Foundation. Nov. 13, 2015. http://kff.org/health-costs/issue-brief/patient-cost-sharing-in-marketplace-plans-2016/
 McGrath, Maggie. “63% of Americans Don’t Have Enough Savings To Covera A $500 Emergency.” Jan. 6, 2016. http://www.forbes.com/sites/maggiemcgrath/2016/01/06/63-of-americans-dont-have-enough-savings-to-cover-a-500-emergency
 Lilleston, Randy. “‘Gap insurance’ for Healthcare Grows in Popularity.’” HR Dive. Oct. 12, 2016. http://www.hrdive.com/news/gap-insurance-for-healthcare-grows-in-popularity
 Sable-Smith, Bram. “Would You Like Some Insurance With Your Insurance?” NPR. Sept. 13, 2016. http://www.npr.org/sections/health-shots/2016/09/13/493695824/would-you-like-some-insurance-with-your-insurance
 The benefit examples shown are intended for illustrative purposes only. These examples do not contemplate the provider’s actual charges for services rendered nor the full extent of the covered person’s out-of-pocket costs.