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Limited Benefit Health Insurance

If you are looking for inexpensive health insurance, you might be tempted to consider a low-cost, limited benefit plan. Although the inexpensive premium might be attractive, it is important to understand that limited benefit health insurance plans do not work the same way that traditional health insurance plans do. Limited benefit health insurance plans can leave you with a large financial responsibility should you become ill and require a hospital stay or extended medical treatment.

  1. Limited Benefit vs. Traditional Health Insurance

    • Limited benefit health insurance plans offer coverage that is significantly lower than traditional insurance plans. A traditional health insurance policy typically has a maximum coverage benefit of at least $1 million, and many have even higher limits. A limited benefit plan may cap its coverage as low as $10,000, and the cap "per incident" may be less than that. Limited benefit health insurance might offer some coverage for preventive services but will not be as comprehensive as a traditional health insurance plan.

    Qualifying for a Limited Benefit Health Insurance Plan

    • Because the insurance company has very little risk with a limited benefit plan when compared with a traditional health insurance plan, the underwriting guidelines for limited benefit plans are typically more relaxed than traditional health insurance plans. A person with a poor health history may still be approved for a limited benefit plan because the insurance company knows that it is liable for only a small amount.

    Warnings

    • Because of the low coverage limits on a limited benefit health insurance plan, you run the risk of being responsible for a large medical bill should something happen. A limited benefit insurance policy may pay only a small portion of the bill if you are admitted to the hospital. An emergency room visit can quickly cost more than $1,000, and hospital stays can be more than that per day, even if you don't have a surgical procedure. Limited benefit plans usually offer a coinsurance instead of a copay for things like prescription drugs and office visits, meaning that you will pay a percentage of the bill instead of a fixed dollar amount. In most circumstances, out-of-pocket medical expenses will be much higher.

    Alternatives to Consider

    • If you are looking for a lower-cost health insurance that still offers more traditional coverage, ask your health insurance agent about a high-deductible health insurance plan or a health savings account plan. With a high deductible plan, you may have more up-front medical costs, but plans like health savings accounts limit your out-of-pocket risk. The higher the deductible for health insurance, the lower the premium will be. If you have pre-existing health conditions that prevent you from obtaining individual health insurance, contact your state insurance department about the high-risk pool offered in your state.

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