Hospital Confinement Indemnity Plans
Q: I have just taken out two catastrophic health insurance plans on my children. Each plan offers a deductible of $5,000. The agent with whom I was dealing has suggested that I look into purchasing additional hospitalization plans in the event my children need to be hospitalized. I notice that hospitalization plans are not offered through any of the agents listed in your directory. What is the difference between a hospitalization plan and health insurance plan?
A: Basically, a hospital plan pays you a set dollar figure for everyday that you are in the hospital. A health insurance plan pays the hospital a percentage directly for their coinsurance amount. Hospital plans are also known as hospital confinement indemnity plans and can be purchased in addition to your current health insurance. These are more like disability policies that are designed to provide you with extra cash while are in the hospital. You may use the cash for anything that you want, such as supplementing lost income or helping pay the deductible or coinsurance required from your health insurance company. It might be logical to purchase this type of coverage to help offset the cost of the $5,000 deductible required on your major medical policy, but the amount that you are compensated under the hospital indemnity plan will not cover the deductible unless you are in the hospital for many, many days. This will depend on the amount that you are paid for each day in the hospital. The typical hospital plan will pay you $200 to $300 per day, so you would need to be hospitalized for 3 weeks in order to get enough cash under the indemnity plan to pay the $5,000 deductible. You also want to look at the plan closely to see if there is a limit on the number of hospital days per year for which they will provide compensation.
This type of insurance is not very expensive, compared to standard health insurance premiums, but you will need to determine for yourself if the potential benefits are worth what you are being charged. Keep in mind that most medical procedures today are performed out-patient, so only the most serious of illnesses will benefit from this supplemental type of coverage.
Hospital plans are much cheaper than traditional major medical plans. However, please don’t make the mistake of thinking that hospital only plans are in fact major medical health insurance plans. They are not. There are many many expenses that could be incurred in a catastrophic situation that would not be covered under a hospital only plan such as medication, cancer treatment, certain procedures, etc. but that would be covered comprehensive major medical health insurance plan. Maybe consider an HSA or other high deductible plan rather than a very limited benefit hospital only plan for the best value!
Comment by California Health Insurance Agent — May 15, 2007 @ 5:46 pm