About Health Insurance Hospital Cash Plans

Hospital cash is marketed as insurance that gives you a level of protection from financial hardship if you become hospitalized. The monthly premium payments may be low. Sometimes the accompanying sales literature touts that you will not be denied coverage because of any health condition and that you will never be singled out for a rate raise. This type of insurance can be useful as long as you accept it for what it is.

Traditional Health Insurance

• Traditional health insurance reimburses your health care providers and hospital facilities for costs associated with your treatment and your required medical services, within the terms of the insurance coverage. With some managed care HMO plans you pay little or nothing out of pocket for medical care. However, with many health care plans you pay a deductible amount and co-payments. The insurance company, once a claim is approved, pays the providers. In other words, the money trail typically goes from you or from the insurance company directly to doctor, lab and hospital. The insurance company doesn't usually put the money in your hands.

Hospital Cash Plans

• Hospital cash insurance is paid directly to you. You can use the benefits paid to you as you like. You may decide to use the benefits to pay for your medical deductibles or co-payments, but you do not have to. If it is to your advantage to pay for child care during your convalescence or to save the money, the choice is yours.

Supplement Not a Substitute

• Hospital cash insurance is typically classified as a limited benefit type of insurance plan. Limited benefit plans are intended to act as a supplement to comprehensive traditional health insurance plans. Some plans have a limit on the number of days that will be covered. Others have a dollar amount cap that they will pay for unlimited days, provided those days are as an inpatient in an acute care hospital. Some plans have lifetime limits and/or annual limits. Consumers need to read and understand all of the limitations and exclusions of the plan to determine whether the plan is a good value for its premium costs. Consumers should also retain all information, especially the insurance policy.

Considerations

• Before buying into the advertising, you need to decide if a hospital cash plan is right for you. If you have employer provided coverage that pays full cost for a specified number of days in the hospital, the premiums you pay for additional coverage are probably not worth it. On the other hand, if your plan has a per day deductible, you may want to consider a plan that will fill the gap. You should also consider that according to the U.S. Centers for Disease Control and Prevention in its published FastStats, the average length of inpatient hospital stay is 4.8 days. If you could manage your current plan's deductible for that amount of time without hardship, then the premium for a cash plan may not be a good value for you.