Have an HDHP? Fill in the Gaps With HI
The popularity of high-deductible health plans (HDHP) is leading to an increase in Hospital Indemnity Insurance (HI) as a way for employers to provide employees with cost-efficient financial protection against rising health care costs.
An HDHP is an employer-sponsored health insurance plan that features a higher deductible than a traditional insurance plan. The monthly premium is usually lower, but employees must pay more before the insurance company pays its share. Most HDHPs have Health Savings Accounts (HSA) which allow employees to pay for qualified health-related expenses that aren’t covered by their health insurance policy. Money deposited into the account is not taxed.
Despite the low premiums of an HDHP and the opportunity to save up for big medical expenses in an HSA, many employees don't have enough saved to pay for hospital stay costs — especially since they must cover deductibles and copays. Prior to the COVID-19 pandemic, 78 percent of Americans were already living paycheck to paycheck, according to a survey by CareerBuilder.
To help save money, many employees who can't handle the financial challenge of HDHPs are delaying or skipping doctors' appointments or putting off surgery or recommended treatments and procedures. So, while they may be saving on premiums, they are putting their health at risk by neglecting necessary health care.
Hospital Indemnity Insurance addresses this dilemma to some extent by providing cash benefits for each day an employee is in the hospital for an illness or injury that is covered by the plan.
For instance, the cost of an average hospital stay is $2,346 per day. Hospital indemnity insurance pays cash benefits and the cash is sent directly to the member instead of the doctor or hospital. Since the premium is paid with post-tax income, the benefits are not taxable.
Hospital Indemnity Insurance will help cover the following costs:
- Hospital confinement (with or without surgery)
- Intensive Care Unit (ICU) confinement
- Critical Care Unit (CCU) confinement
Some plans have richer benefits and may include:
- Outpatient surgery
- Continuous care
- Outpatient X-rays and laboratory procedures
- Outpatient diagnostic imaging procedures
- Emergency rooms
- Physician office visits.
There is a 30-day waiting period before your cash benefits can be used for paying hospital costs due to an illness. However, depending on the plan, there may not be a waiting period for accidental injuries that require a hospital stay.
Although this coverage is not medical insurance, it can be designed to pair with a company's health insurance plan. It is guaranteed issue — which means it's suitable for all employees — particularly those who are 50 or older or who are pregnant. Dependents can be included on the plan, although there is an additional monthly premium for each dependent covered.
While every hospital indemnity plan is different, there usually are three core types of benefits offered in employer-sponsored plans:
- Hospital admission for illness or accidents.
- Overnight stay, which pays a smaller daily fixed benefit for each overnight stay.
- Intensive care coverage, which pays an additional fixed daily benefit for each overnight stay.
HI can provide peace of mind for employees and encourage them to seek the care they need before their conditions worsen. Please contact us if you'd like more information.
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In this issue:
IRS Announces 401(k) Contribution Limits for 2021
Pandemic Puts Pressure on Workers
Have an HDHP? Fill in the Gaps With HI
How to Thwart Identity Theft in the Workplace
Taking #MeToo Allegations Seriously
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