Everyone knows that spending even one night in a hospital costs more than the Presidential Suite at most hotels. The average cost of a hospital stay is around $2,000 per day. Combine that with the fact most silver level health insurance plans have a deductible of at least $3,000 and you quickly drain whatever savings (if any) you may have. This is where a hospital indemnity plan (HIP) comes into play. These plans have become a popular way of helping patients save money on hospital expenses.
WHAT IS A HOSPITAL INDEMNITY PLAN?
In the simplest of terms, a hospital indemnity plan is a standalone policy that provides fixed-dollar-amount benefits for covered hospital services, regardless of the actual billed amount. These policies do not coordinate with your insurance plan and are usually HSA compatible. A HIP helps you when you incur certain medical expenses such as hospitalization, surgery, and certain other services. The benefit payouts may be per day, week, month, or even event depending on how the plan is written.
HIPS ARE NOT HEALTH INSURANCE
Hospital indemnity plans are not major medical insurance and are not meant to replace an ACA-compliant medical plan. Because they are not medical insurance policies, they are not subject to the Affordable Care Act, which means you can be denied coverage based on your pre-existing conditions and other health history. They also do not fulfill any part of the individual mandate, so if you are not already exempt, you could still face a penalty.
GREAT FOR FAMILIES
Hospital Indemnity plans are great for families. In 2012 it was estimated that one in six hospital visits were by children and adolescents. When a child is in the hospital, one or both parents usually take time off work to tend to the child. Additionally, HIPs are great for expecting mothers. New mothers usually spend 1-4 days in the hospital after childbirth and the average out-of-pocket expenses for childbirth exceeds $3,400.
IS A HIP RIGHT FOR YOU?
Only you can determine if you need or can use a hospital indemnity plan. Most people hope for the best and think they will never need to stay in the hospital, or think their insurance will cover everything. In many cases these people are faced with a bill for several thousands of dollars. Most families say they are unprepared for an emergency of $500 or more, so it may be better to play it safe considering how much HIP could save you in the long run.
If you would like more information on Hospital Indemnity Plans or other benefits, speak with a benefit consultant to discuss options for your group.