Here at Washington National, a question we’re often asked is, “If I have health insurance through my employer, why would I need hospital indemnity insurance?”
It’s a fair question, so today we’re going to answer it.
But before we get into the nitty-gritty, there’s a little bit of terminology you first need to be familiar with.
- Premium: This is what you pay every month for your health insurance. Your employer probably pays a portion of it, and your portion is probably automatically deducted from your paycheck each month.
- Deductible: This is the amount you need to pay for covered health care services before your health insurance will start paying benefits. For example, if your health insurance policy has a $3,000 deductible, you pay the first $3,000 of covered services yourself. Even after you pay your deductible, you will still usually pay a copayment or coinsurance for covered services.
- High deductible health plan (HDHP): HDHPs are popular these days. With this plan, you pay lower monthly premiums, but you pay more care costs yourself before the insurance company starts to pay benefits. The IRS defines an HDHP as any plan with a deductible of at least $1,350 for an individual or $2,700 for a family.1
- Copayment: Also known as “copay,” this is a fixed amount you pay for covered health care services after you’ve paid your deductible. For example, consider a health insurance plan with an allowable cost for a doctor’s visit of $100, and a copayment of $20. If you’ve paid your deductible, you pay $20 at the time of the visit. If you haven’t met your deductible, you pay $100, the full allowable amount for your visit.
The rising costs of health care
It’s all over the news, so you won’t be surprised to hear that Americans are spending more than ever for their health care needs. Here are some numbers to consider:
- In 2018, the average annual premium for family coverage rose 5% to $19,616. For single coverage, premiums rose 3% to $6,896.2
- In 2018, covered workers contributed 29% of the premiums for family coverage, and 18% for single coverage.2 This means, on average, average workers will spend $5,688.64 for their family insurance premiums this year, and their employer will contribute the remaining $13,927.36.
- As shared above, the IRS defines an HDHP as any plan with a deductible of at least $1,350 for an individual or $2,700 for a family.1 But these are just base numbers. The average deductible for silver plans in the Affordable Care Act exchange this year is almost $4,000. And in the fast food industry, many employers are only offering plans with the maximum out-of-pocket allowed. Currently, that’s a $7,150 deductible for an individual and double that for a family.3
- The average amount workers paid toward their deductibles rose 229% between 2005 and 2015, yet wages rose just 31% during the same period.4
The rising costs of health care—an example
To truly understand the financial impact of the information above, take a look at this example. Let’s say a family of four contributes $600 per month for their health insurance premium or $7,200 per year. Their health plan features a high deductible of $3,000, which means that they must spend $3,000 before their health insurance will start paying benefits. If this family of four meets their deductible, that means they have spent $10,200 for the year just on premiums and meeting their deductible. This does not include copayments, noncovered treatments, out-of-network doctors and other common expenses.
The impact of hospital costs
It’s no secret that hospital visits are expensive. In fact, when it comes to medical bankruptcy, hospital bills are the largest out-of-pocket expense people face.5 To give you a true picture of how expensive hospital visits are, check out these statistics:
- Common ER procedures can cost as much as $17,797.6
- The average hospital stay costs over $10,700.7
- Fixing a broken leg can cost up to $7,500.8
- The average cost of a hospital stay for a heart attack is $20,086.9
- For people with private health insurance, the out-of-pocket cost for a hospital stay is more than $1,000.10
Surprise hospital bills
If you experience a hospital stay, chances are high you’ll end up paying your entire deductible amount and your health insurance will start paying benefits. However, you may still be exposed to surprise bills that your health insurance won’t cover, leaving you on the line for the entire amount. A report by the Consumer Reports National Research Center found that nearly one-third of privately insured Americans received a surprise medical bill where their health plan paid less than expected in the last two years.11
“For years, we have heard horror stories from consumers hit with surprise medical bills following routine and emergency procedures. Even if you go to a hospital in your network, the unfortunate truth is that there is no guarantee that all your treatment—whether it’s radiologist, anesthesiologist or lab work—will be treated as in-network, leaving patients owing thousands of dollars they never anticipated,” says DeAnn Friedholm, Director of Health Reform for Consumers Union.11
Could you cover the costs of a hospital stay?
Above we shared that for people with private health insurance, the out-of-pocket cost for a hospital stay is more than $1,000.9 When you consider your deductible, copays, premiums, the chance of surprise bills, plus your everyday living expenses, $1,000 is a conservative amount—but still a large sum for the average American family! According to a recent report by Bankrate, just 39% of Americans can cover an unexpected $1,000 bill with funds from their savings.12
If you were faced with an unexpected $1,000+ of hospital stay expenses, would you be able to cover the cost?
The important role of hospital indemnity insurance
We’re finally going to circle back to the question posed at the beginning of this blog post: “If I have health insurance through my employer, why would I need hospital indemnity insurance?”
The answer is simple: Hospital indemnity insurance can help protect you and your family from the high out-of-pocket costs of hospital stays.
Our new hospital indemnity insurance product, Hospital AssureSM, complements your existing health insurance plan by directly paying you fixed-dollar cash benefits in the event you or a covered family member are hospitalized due to a covered sickness or accident—in addition to any other insurance you may have.
Cash benefits can be used to help pay the many expenses mentioned above:
- Out-of-network hospital costs
- Everyday bills and expenses when you’re unable to work
One benefit that helps Hospital Assure stand out is our Return of Premium benefit. With this benefit, you can get back all of your premiums paid, minus claims incurred, after the Return of Premium period. This means if you don’t use your policy, the premiums you paid will end up back in your pocket. All you have to do is keep your policy in force! If you don’t use it…you won’t lose it!
Do you want the financial protection that Hospital Assure hospital indemnity insurance can help provide for your family? Talk to your Washington National agent or contact us here to learn more.
1Healthcare.gov, High Deductible Health Plan (HDHP), https://www.healthcare.gov/glossary/high-deductible-health-plan/, 2018.
2National Conference of State Legislatures, Health Insurance: Premiums and Increases, http://www.ncsl.org/research/health/health-insurance-premiums.aspx, October 3, 2018.
3Forbes, High-Deductible Health Insurance: The Good, The Bad, And The Ugly, https://www.forbes.com/sites/johngoodman/2018/05/11/high-deductible-health-insurance-the-good-the-bad-and-the-ugly/#dd2e0bf7b180, May 11, 2018.
4Time Money, Why Your Health Care Costs are Out of Control in One Graph, http://time.com/money/4970511/why-your-health-care-costs-are-out-of-control-in-one-graph/, October 5, 2017.
5Healthline, How Much Does It Cost to Stay in the Hospital, https://www.healthline.com/health-news/how-much-does-hospital-stay-cost#6, July 17, 2017.
6 Vox, Toe ointment, a $937 bill, and a hard truth about American health care, https://www.vox.com/health-care/2018/4/10/17156230/emergency-bill-prices-pediatric-patients, April 10, 2018.
7Business Insider, The 35 most expensive reasons you might have to visit a hospital in the US—and how much it costs if you do, http://www.businessinsider.com/most-expensive-health-conditions-hospital-costs-2018-2, March 1, 2018.
8U.S. Centers for Medicare and Medicaid Services, Protection from high medical costs, https://www.healthcare.gov/why-coverage-is-important/protection-from-high-medical-costs/, 2018.
9Becker’s Healthcare, 10 medical conditions with the highest average cost per inpatient stay, https://www.beckershospitalreview.com/finance/10-medical-conditions-with-the-highest-average-cost-per-inpatient-stay.html, February 15, 2018.
10Healthline, How Much Does It Cost to Stay in the Hospital?, https://www.healthline.com/health-news/how-much-does-hospital-stay-cost#1, July 17, 2017.
11Consumers Union, Consumer Reports survey finds nearly one-third of privately insured Americans hit with surprise medical bills, https://consumersunion.org/news/consumer-reports-survey-finds-nearly-one-third-of-privately-insured-americans-hit-with-surprise-medical-bills/, 2018.
12CNBC, Only 39% of Americans have enough savings to cover a $1,000 emergency, https://www.cnbc.com/2018/01/18/few-americans-have-enough-savings-to-cover-a-1000-emergency.html, January 18, 2018.