A hospital indemnity plan also referred to as a hospital benefit plan, is an additional insurance policy that provides a set reimbursement for each day you are hospitalized. This can help cover some of the out-of-pocket expenses that come with Original Medicare or a Medicare Advantage plan.
How Hospital Indemnity Plans Work
Hospital indemnity plans provide reimbursement for hospital stays and various related services. Offered by private insurance providers, these plans come with different benefits, but the core feature is reimbursement for hospital stays.
When selecting a plan, you’ll decide on the reimbursement amount and the duration. For instance, you might opt for $300 per day for up to six days. Keep in mind that higher reimbursement rates typically mean higher premiums.
Additionally, many plans offer coverage for hospital observation. Even if you’re kept overnight, you might not be officially admitted as an inpatient, and your primary insurance may not cover observation costs. A hospital indemnity plan can help offset these expenses.
Emergency room visits are another common feature of these plans. They can provide reimbursement if you visit the ER but don’t require an inpatient stay.
Many plans also allow you to add extra coverage options or riders. These might include benefits for inpatient mental health care, transportation, outpatient therapy, chiropractic treatments, surgeries, urgent care, lump-sum cancer payouts, and skilled nursing services.
Why You Should Purchase a Hospital Indemnity Plan
Many Medicare beneficiaries are increasingly turning to Medicare Advantage plans. This trend continues to grow as more providers partner with private insurers offering these plans. While Medicare Advantage plans often come with low premiums (sometimes as low as $0 per month) and numerous additional benefits, they can also entail significant inpatient hospital costs.
Typically, Medicare Advantage plans require you to cover a fixed amount each day for the initial days of an inpatient hospital stay. This represents the highest out-of-pocket expense associated with these plans, with average costs around $300 for the first five days. Such expenses can quickly impact your budget.
Moreover, many plans do not cover costs if you are only under “observation” status rather than being admitted as an inpatient. In such cases, you bear the full financial responsibility, whether you have Medicare Advantage or just Original Medicare (Parts A and B).
If you have Original Medicare without additional coverage, the costs can be even higher. This is why many beneficiaries opt for a Medicare Advantage or Medicare Supplement plan. Let’s explore these costs in more detail.
Medicare Part A covers inpatient hospital stays, but you’re first responsible for the deductible. For 2024, this deductible is $1,632. It’s important to note that this deductible applies to each “benefit period.” A benefit period starts on the first day of hospitalization and ends after you’ve been hospital-free for 60 consecutive days. Thus, you might have to pay the deductible multiple times within a year.
Additionally, Part A has coinsurance costs. Medicare covers the first 60 days, but after that, you’re responsible for a daily fee. In 2024, this amounts to $408 per day from day 61 through day 90. Beyond that, if you have any of the 60 lifetime reserve days left, you’ll pay $816 per day. Once those reserve days are exhausted, you’re responsible for the entire daily cost.
In light of these expenses, a hospital indemnity plan can significantly reduce your medical bills.
How to Choose a Hospital Indemnity Plan
When choosing a hospital indemnity policy, start by reviewing your existing health insurance plans. If you’re enrolled in a Medicare Advantage plan, assess your out-of-pocket costs for hospital stays. For example, if you’re responsible for $250 per day for the first four days, consider setting similar parameters for your indemnity policy. However, you have the flexibility to adjust the amounts based on your needs.
Consider any additional costs associated with your plan and whether you might need to add riders to address gaps in your existing coverage.
Hospital indemnity plans are not exclusively for Medicare beneficiaries. If you have a high-deductible policy or coverage that only handles catastrophic events, a hospital indemnity plan can offer extra reassurance in the event of an unexpected hospital stay.
One of the advantages of these plans is their affordability and the ability to tailor them to your budget and coverage requirements. If you want to explore hospital benefit plans further and obtain a quote, reach out to a local insurance agent. The experts at Carolina Senior Benefits can assist you in evaluating your current coverage and identifying any coverage gaps.
