Hospital confinement indemnity insurance makes cash payments directly to the policyholder when admitted to an approved facility for a covered medical condition.
A policy helps to offset unreimbursed expenses left by traditional medical plans such as deductibles, copayments, and charges above usual customary and reasonable when patients utilize out-of-network providers.
Learn how a policy works, and what key terms mean to your unique situation.
- Coverage for pregnancy and childbirth
- Definitions of key policy terms and conditions
Hospital Indemnity Insurance Coverage for Pregnancy
Your hospital confinement indemnity insurance policy may cover certain pregnancy related expenses when purchased prior to conception through your employer. Policies contain a nine or ten-month exclusion for normal childbirth. Plans for individuals bought privately rarely include this valuable feature.
Learn how these plans work for labor and delivery, admission of your infant to Neonatal Intensive Care (NICU), and get a sample quote to determine monthly costs.
Labor and Delivery
Many women plan to deliver their baby in the maternity ward. It is the safest setting for mom and her newborn. Most gynecologists prefer to work with the modern equipment and easy access to surgery centers, and anesthesiologists.
Labor and delivery are frequently the most expensive stage in most pregnancies. These services do not come cheap. Many primary plans come with high deductibles. Hospital indemnity insurance policies pay a cash benefit upon admission, and many make an additional payment per subsequent day of confinement.
The true value of hospital indemnity insurance for pregnancy reveals itself when your infant or infants need to spend their first days and weeks of life in an incubator in a NICU. 12% of newborns deliver preterm, or with a serious medical issue.
Your policy may pay an additional initial admission benefit and an additional daily confinement benefit for each infant requiring specialized care in the NICU. The total claims payments could be substantial.
Couples undergoing infertility treatments should purchase a policy. Fertility drugs and IVF increase the odds of multiple births, which account for a large portion of NICU admissions. The requirement to start your policy prior to conception is not an obstacle.
Quotes and Rates
Getting a hospital indemnity insurance quote to estimate your monthly premium rate for a policy covering pregnancy is not a fruitful exercise. Most carriers sell policies with this feature through employer groups because the cost to value is simply too great to offer privately, as you will see from this sample premium estimate.
|Monthly Premium||Admission Benefit|
The annual cost is a fraction of the expected benefit for normal labor and delivery. In addition, the same policy may double or triple claims payments if one or two infants require care in the NICU.
Instead of requesting a quote, ask your employer to offer a voluntary option you can pay for yourself via payroll deduction. The agent handling your group can provide cost estimates for the plan selected by your employer.
Hospital Confinement Indemnity Coverage Definitions
A proper hospital indemnity coverage definition provides the explanation of key terms and concepts. These policies are supplemental plans that work differently than other more traditional forms of healthcare plans. Certain terms may have different demarcations, and the claims payments may have tax consequences.
Hospital indemnity is a form of supplemental insurance. This expresses that policies make claims payments directly to the owner, rather than the provider. If you experience a confinement, you will need to file a claim with the carrier in order to reap the benefits of your policy, rather than just handing the admissions department a card.
Supplemental also describes that the policy has limited use criteria. In this case, when you are confined for a covered accident or sickness. Some policies do include additional treatments such as testing, outpatient surgical procedures, etc.
Supplemental also explains that the policy does not coordinate benefits with your primary medical plan. The policy pays a fixed dollar amount according to a pre-defined schedule, for a specific length of time, which does not vary.
Definition of Key Terms
Every hospital indemnity insurance carrier defines key terms differently, so consult your outline of coverage for exact interpretations. Below are paraphrased text from a sample policy.
- Hospital – means a place that provides overnight care for sick or injured people, supervised by doctors, and has X-ray equipment, a laboratory, and an operating room.
- Excepted Benefits – means the policy will not pay claims for injuries or illnesses caused by specifically listed conditions such as addiction to drugs, cosmetic surgery, intentional injuries, armed conflicts, etc.
- Covered Accident – means an accident, which occurs after the effective date, while the policy is in force, which is not listed as an excepted benefit.
- Covered Illness – means a sickness, infection, or disease not caused by an accident, which begins after while the policy is in force, and is diagnosed after the effective date.
- Preexisting Condition – means having a physical condition for which the person received medical advice, testing, treatment, or taken medication within 12 months before the effective date.
- Out Patient Surgery – means the policyholder incurs expenses for a surgical procedure for a covered accident or illness, and he or she is not confined to the hospital at the time of the treatment.
- Group Contract – means that the employer group owns the master contract and that benefits are uniform and must comply with laws in the in situs state.
- Individual Contract – means that the employee owns the policy even though purchased voluntarily through payroll deduction, and may keep it in force after separation from the employer.
Hospital indemnity insurance claims payments may be taxable, depending upon how you handle premium payments. Per IRS guidelines, expense based claims are not taxable, but indemnity benefits (lump-sum payments made without regard to medical expenses) are subject to taxation.
Many carriers will issue a 1099 statement any time claims payments exceed $600 annually. Keep in mind that these rules apply only if you recognize savings on premium payments. This may occur in three scenarios.
- Your employer paid a portion of the premium on your behalf.
- You paid the premiums using pre-tax payroll deductions.
- You claimed the premiums as a tax-deductible medical expense.
This means that women purchasing hospital indemnity coverage for pregnancy and childbirth should pay the premiums using after tax deductions to maximize the value of the plan.