Do Seniors Need Supplemental Hospital Plans?

Published on November 20, 2021

Medicare, Medigap, and Medicare Advantage plans provide comprehensive coverage for hospitalizations for seniors, but few clients realize how much they will still be responsible for out-of-pocket expenses. Supplemental hospital insurance can help pay for the costs Medicare plans do not cover. While no one plans to be in the hospital, thoughtful planning beforehand can protect seniors’ savings if they ever need to be admitted. 

Read on to learn how supplemental hospital plans work, how much they cost, and who may benefit from purchasing one.

What Is Supplemental Hospital Insurance?

Supplemental hospital plans – sometimes called hospital indemnity plans – pay fixed dollar amounts when the insured is admitted to the hospital. These plans can pay a lump sum upon admission or can pay smaller amounts for specific services used. 

The payouts for supplemental hospital plans are not related to the actual cost of the service or event; they will pay the value on the policy whether the beneficiary’s responsibility is higher or lower than that amount. This means a hospital indemnity plan that pays a lump sum of $10,000 will pay that amount whether the insured’s actual costs are less than $10,000 or more than $10,000. Benefit amounts are paid directly to the beneficiary in the form of a check, and there are no restrictions for how the insured can use the money.

When selling these plans, it is essential to ensure your senior clients understand that these are not health insurance policies, so they cannot replace their Medicare or Medicare Advantage coverage. Instead, these plans are intended to help offset the expenses of a hospital stay that remain after Medicare has paid their portion.

Out-of-pocket Costs Not Covered by Medicare

Seniors in Medicare, Medigap, and Medicare Advantage plans may benefit from supplemental hospital insurance coverage because of the high out-of-pocket costs for hospitalization. 

$0-premium Medicare Advantage plan enrollees, in particular, might benefit from additional hospital insurance. Because they do not have a monthly premium, these $0-premium plans have higher cost-sharing – deductibles, copayments, coinsurance, and higher out-of-pocket maximums. 

For 2021, Medicare Advantage plans can have annual out-of-pocket maximums of up to $7,550. For seniors on a fixed income, such an unexpected expense can cause a severe financial burden. In these instances, having a supplemental hospital policy can provide additional cash needed to maintain the client’s financial plan.

How Much Does Supplemental Hospital Insurance Cost?

Premiums for hospital indemnity insurance plans vary based on carrier, benefits, and age of the beneficiary. Premiums can start under $20 per month and go as high as $400. Clients interested in these plans should begin with evaluating their Medicare coverage to see what their exposure is for hospitalizations and then build a supplemental plan that specifically fills in those gaps.

Who Can Benefit From a Supplemental Hospital Insurance Plan?

Hospital indemnity policies have many benefits, but they are not always a good fit for every client. 

Clients most likely to benefit include:

  • Those in Medicare Advantage plans, which are more likely to have higher costs for the beneficiary in the event of hospitalization
  • Those who do not have the resources to pay for a significant out-of-pocket expense

Clients less likely to need a supplemental hospital plan include:

  • Those with Medigap plans that cover most or all of hospitalization costs
  • Those who can comfortably absorb the deductible, copayment, and coinsurance from a hospital stay

Final Thoughts

Supplemental hospital insurance plans fill a real need for Medicare beneficiaries experiencing a hospital stay. By providing extra cash to cover deductibles, coinsurance, and other indirect costs, hospitalization plans can help senior clients protect their savings and maintain their retirement lifestyle. 

How Do I Learn More?

To find out more information about supplemental hospital insurance, visit American Senior Benefits. We will be happy to answer your questions about how you can incorporate these plans into your portfolio.

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