The POWER of Hospital Indemnity Plans

In the complex landscape of healthcare coverage for Medicare beneficiaries, supplemental insurance plans play a pivotal role in filling critical gaps. Among these, hospital indemnity plans stand out for their unique ability to provide financial protection during hospital stays, ensuring peace of mind and additional security. Particularly valuable are the riders associated with these plans, which offer lump sum payments for conditions like cancer, heart attacks, and strokes.

Understanding Hospital Indemnity Plans

Hospital indemnity plans, also known as hospitalization insurance or hospital insurance plans, are supplementary insurance policies designed to complement Medicare coverage, but you don't have to have Medicare to have them. They are designed to help cover costs that traditional Medicare plans may not fully address, such as daily copayments when you are hospitalized, or help provide lump sum benefit to handle situations like cancer. These plans offer beneficiaries financial support during unexpected hospitalizations, providing a fixed lump sum, daily, weekly, or monthly payout during the hospitalization period.

The great thing is that hospital indemnity plans can pay you over, and over, and over again all throughout your life. And if you are Just turning 65, you are guaranteed issue, meaning you cannot be denied coverage because of your health.

How It Works

The best way to describe Hospital Indemnity plans is with a simple Example, so we will use 3 examples. (1) Someone enrolling in medicare for the first time who adds on this coverage who has a daily hospital copayment of $300 per day for 5 days (2) A veteran who is hospitalized by the VA who does not have an inpatient copay (3) Someone who has a really bad year with their health

*All rates below are taken from real examples, but rates may vary by state, zip code, and company. The base hospital indemnity plan is guaranteed issue, but added coverage such as the Lump Sum Cancer does require health questions

Example 1

Mary is turning 65 and is very healthy, and she still works part time to supplement her income and earns about $1,000 per month.

She is enrolling in a Medicare Advantage plan with daily hospital copays of $250 per day for the first 7 days. She chooses to add a hospital indemnity plan that will pay her $300 per day for up to 10 days if she is hospitalized. This plan costs her $35 per month.

3 years later, Mary has paid a total of $1,260, and then she has gets very ill and is hospitalized for 8 days.

Her Medicare copayment is $250 x 7 days (the 8th day is no cost to her) = $1,750. Plus she missed 5 days of work, costing her $250 of income that month for a total of a $2,000 financial burden.

But she remembers she has been paying for a Hospital indemnity plan. She files a claim with the company and she received a check in the mail for $300 for all 8 days she was hospitalized, for a total of $2,400. This allows her to pay her hospital bill, replace her income, and still have $400 remaining to help with medication copays, a few lab copays, and give her grand-daughter an extra $50 for helping take care of her animals while she was recovering.

Example 2

John is an Honored Veteran with a 100% disability rating with the VA. He chose to enroll in Medicare Advantage plan for veterans that lowered his part B premium, but he plans to continue using the VA for his healthcare, he just likes the peace of mind he has knowing he can go elsewhere for a second opinion if he ever needs to.

Due to his disability rating, he can expect a $0 daily copay if he is ever hospitalized by the VA, but due to his health condition, he is worried he may face hospitalization in the near future. With the money he is saving on the Medicare Advantage plan, he gets a Hospital Indemnity plan for $74 per month, which will pay him $500 per day for 5 days if he is hospitalized, $1,000 if he needs outpatient surgery, and $50 per day he goes to outpatient rehab for up to 30 days.

8 months later he is hospitalized for 6 days. His VA copay is $0, but the hospital indemnity plan still pays him $500 per day for 5 days, so he receives a check in the mail for $2,500. After recovery, his doctor informs him that he needs a pacemaker which is outpatient surgery. When that occur, John can expect to receive an additional $1,000 for a total of $3,500.

90 Days later, John is hospitalized again for 3 days due to the flu, his hospital indemnity plan will pay again, at $500 per day for 3 days, for $1,500 total.

Example 3

Mark has struggled with a lot of health issues, and is worried about having cancer due to it's family history. He enrolls in a plan that is a $275 daily copay for 5 days. His hospital indemnity plan he chooses $750 per day for 7 days, plus he adds on a $400 benefit if he needs the ambulance, $20,000 if he gets cancer, and $1,000 for outpatient surgery. His total cost is only $134 per month.

There is a 6 month wait on benefits that will pay out due to pre-existing conditions. Unfortunately, 3 months into his plan he is hospitalized for a pre-existing condition and the plan will not pay a benefit. He must pay $275 per day for 5 days for a total of $1,375 to the hospital.

Then 7 months into the plan he calls an ambulance and is rushed to the hospital for the same pre-existing condition. This time the hospital plan pays him $400 for the ambulance, plus $750 for 4 days of hospitalization, he is paid a total of $3,400.

3 months after being released, he is hospitalized again for 5 days. He received another $3,750.

Then during a routine checkup, his doctors find cancer. He gets paid $20,000 to spend as he needs.

In total, Mark has paid just $1,206 for his plan since he has had it, but it has paid him $27,150. Without this plan, he would have to come up with $1,375 for his initial hospitalization, and then over $8,000 over the course of the next year as he dealt with his cancer.

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