Hospital indemnity plans help you pay for out-of-pocket costs.

Hospital Indemnity Plans - Senior Male Patient with Cane Talking about His Health with a Female Physician Who is Taking Notes in the Patient’s Hospital Room

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If you have limited income and resources, hospital indemnity plans may help cover health care costs.

What is a hospital indemnity plan?

Most people purchase a hospital indemnity plan in addition to other coverage like a major medical plan, Medicare, or Medicare Advantage. This type of plan typically provides a cash benefit for each day confined in the hospital and they generally do not have a deductible or waiting period. Also, hospital indemnity plans do not have a limited provider network. Therefore, with most plans, you’d begin receiving your benefit from the first day you’re confined in any hospital.

How to determine which plan to choose.

Different companies offer different plans. However, in most cases, you’d pick a plan based on the amount of cash you’d want to receive for each day confined. You’d also choose the maximum benefit period. In short, this refers to the total number of days in which you would be able to receive a benefit. The higher the benefit amount and the longer the benefit period, the more expensive the premium will be.

Advantages of hospital indemnity plans.

Hospital indemnity plans usually do not have restrictions on what you can do with the benefit. Similarly, they do not reimburse you for out-of-pocket expenses. Instead, you will receive your selected amount per day, up to the maximum number of days chosen, even if you are not responsible for any charges. You can use your benefit however you choose, whether that’s for transportation costs, groceries, rent, or anything else. Many plans also offer additional options, such as reimbursement for the care you may receive before or after a hospital stay, or for outpatient costs.

What hospital costs are patients responsible for?

A hospital indemnity plan may help cover the costs you’d be responsible for, even with Medicare coverage. For example, under Medicare Part A, a patient must pay their deductible before Medicare starts to pay their portion. After that, Medicare will begin to pay a portion or all of the charges depending on the number of days spent in the hospital. The patient may be responsible for a copay. The current breakdown for 2021 is as follows:

  • Days 1-60 per benefit period: $0 coinsurance per day.
  • Days 61-90 per benefit period: $371 coinsurance per day.
  • Days 91 and beyond: $742 per day up to 60 days lifetime reserve, then 100% of charges once lifetime reserve days are exhausted.

What is the lifetime reserve?

Essentially, Medicare pays a portion of all of the hospital charges for the first 90 days of each benefit period. Each benefit period, the first 90 days reset. The lifetime reserve is a set of 60 days that could be used after each benefit period’s first 90 days are used up. The lifetime reserve days do not reset each year.

How lifetime reserves work.

So, for example, if in the first year a person is in the hospital for 95 days, they’d use five of their lifetime reserve days. In the second year, their first 90 days of hospitalization would reset, and they’d be responsible for the coinsurance split that corresponds to the number of days spent in the hospital that year. If they have more than 90 days hospitalized, they’ll again be able to tap into the lifetime reserve, but there would only be 55 days left at that time since five were used the year prior.

Do lifetime reserve days reset?

Lifetime reserve days do not reset. Once all 60 are used, there are none left. If a person is hospitalized more than 90 days in one benefit year and there are no remaining lifetime reserve days, the patient will be responsible for the entire charge.

If you’re interested in learning more about hospital indemnity plans to supplement your Medicare coverage, contact us to review your options.

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