Hospital indemnity insurance is gaining in popularity as a way to deal with increasingly higher out-of-pocket expenses. It’s not health insurance, but it provides a cash benefit you can use to pay for expenses health insurance doesn’t cover. The Centers for Disease Control and Prevention estimated that the average hospital stay in 2017 was five days and cost more than $30,000. Few families are prepared for such costs.
According to a 2016 Kaiser Family Foundation and New York Times survey, 20 percent of Americans found that they had serious financial challenges when trying to pay their medical bills, even with health insurance. One reason medical expenses are a challenge for many people is that health insurance companies limit what they will pay for many services. Also, as premiums have increased to keep pace with higher costs, consumers have been opting for higher deductibles (the out-of-pocket amount a policyholder must pay before insurance kicks in) to keep premium costs down.
The average deductible for a bronze Obamacare policy in 2019 is $5,900. Other costs policyholders must pay are coinsurance, the percentage of costs paid after the deductible is met, and the copay, a fee that must be paid for a covered health care service. Hospital Indemnity Insurance pays you directly when you go to the hospital. To use indemnity hospital insurance, you must inform your insurance company immediately and submit a claim.
When your claim is approved, your benefit payments will begin. Many hospital indemnity insurance plans pay based on a fixed cash benefit. Here’s an example: You are admitted to the hospital and your policy pays $250 for the emergency room; $1,000 for the hospital admittance; and $9,000 for being in the hospital for three days.