What is Hospital Indemnity Insurance, and Do Your Employees Need It?

According to Healthcare.gov, the cost of a three-day hospitalization averages around $30,000 — and while health insurance can help cover the better part of that amount, it doesn’t pay for everything.

Cost-sharing responsibilities like deductibles, coinsurance, and copays can leave some patients with thousands of dollars in medical bills, creating expenses that can spiral into lasting debt or even bankruptcy. Medical issues aside, that financial stress itself can impact employees’ health and productivity.

With flexible cash benefits, hospital indemnity insurance helps offset those costs for employees and for you.

What is Hospital Indemnity Insurance?

Hospital indemnity is a type of insurance plan that supplements traditional health insurance. Policyholders pay monthly premiums and receive the benefit of lump-sum payouts for designated events, such as basic stays in a hospital or time spent in an intensive care unit.

For example, the plan may pay $500 for a hospital admission and $100 per day for up to a month. Benefits go directly to the employee, who can use the money however it’s most useful — whether for medical bills or everyday expenses such as rent and utilities.

Do Employees Need Hospital Indemnity Insurance?

All insurance decisions should involve a risk-benefit assessment, and hospital indemnity is no different.

After all, hospitalizations can affect anyone. Half of the people who are hospitalized are between the ages of 18 and 65. Considering an average hospital stay surpasses $10,000 per day, costs can add up quickly.

Health insurance only helps so much. Before most plans cover 100% of costs, they typically require policyholders to meet a deductible as well as coinsurance or copays up to the out-of-pocket maximum. In 2020, out-of-pocket maximums can be as high as $8,150 for one person and $16,300 for a family.

If your benefits package includes narrow-network plans, such as Exclusive Provider Organizations (EPOs) or Health Maintenance Organizations (HMOs), those costs can be higher if employees receive care outside of the preferred network.

While a hospital stay alone could put an employee in financial trouble, they may also be responsible for living expenses. This could present a real challenge if they need to take unpaid time off to recover. These reasons account for about 66% of bankruptcies in the United States, CNBC reports.

Compare those risks with the benefits and affordability of hospital indemnity insurance, which typically costs around $10 to $15 per month. By offering those plans as part of your benefits package, you can give employees added protection while automatically deducting the premiums from paychecks.

A Prudent Piece of Financial Wellness Planning

As financial stress intensifies, it can create issues with mental and physical health, leading to poor sleep, unhealthy habits, and reduced focus at work. Fortunately, employers are increasing their investments in financial wellness programs: In 2019, the number of employers offering such programs had doubled when compared with five years prior, according to a report from Bank of America.

As you scale up your financial wellness efforts, consider whether hospital indemnity coverage could help employees navigate the costs of their medical care. It’s an offering that supports both the well-being of employees and the business.

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