What Does Hospital Indemnity Insurance Cover — And Other Questions Answered

Learn what Hospital Indemnity cost-share plans are, how they work, and what they cover

When you’re researching supplemental health insurance options, you may find yourself asking questions like, “Does it cover X?” or “Does it pair well with Medicare?” And if you come upon cost-share plans like Hospital Indemnity insurance, you may just wonder “Is it worth it?”

Erin Bueltel, product specialist at Medico Insurance Company, answers the most common Hospital Indemnity questions so you can enter a discussion with your agent feeling well-informed and ready to customize a plan to meet your needs.

1. What is Hospital Indemnity insurance?

Hospital Indemnity insurance offers flexible supplemental coverage to major medical, Medicare, and Medicare Advantage plans. Since medical plans don’t cover every dollar of your hospital costs (such as deductibles, copays, etc.), you can work with your agent to select Hospital Indemnity plans that will pay out a specified, fixed-amount benefit for each day you’re in a hospital due to a covered sickness or injury.
Most often, Hospital Indemnity insurance allows you as the policyholder to choose a per-day cash benefit amount and a benefit period, which is the maximum amount of days the policy will pay. Generally, it doesn’t have a deductible or limited provider network, and benefits can be spent in whatever way you choose, from medical bills to household expenses during treatment.

Fill Medicare and Medicare Advantage Gaps with Hospital Indemnity Riders

2. Is Hospital Indemnity insurance worth it, and what does Hospital Indemnity pay for?

Hospital Indemnity is an option that you can add to your overall health insurance portfolio. It pays you a specified amount for each day of covered service you receive, no matter what the final billed charges are.
The base Hospital Indemnity benefit provides a certain dollar amount per day you are in the hospital that is picked by you, the policyholder. This generally ranges from $100 to $600 per day in $25 increments. For most plans, including Medico’s Hospital Indemnity insurance, you can add optional riders that provide additional benefits for outpatient services as well.

3. Are Hospital Indemnity payments taxable?

No. “Since the premium is paid with post-tax income, benefits received are not taxable,” Bueltel says.

4. Does Hospital Indemnity cover emergency room (ER) visits?

“Policies differ from company to company, but most have additional benefits within the base policy or have additional coverage through riders that are offered at an additional cost,” Bueltel says, so you can customize your hospital insurance to be tailored to what you think you may need.
“Some of these benefits include ER visits; however, most ER benefits stipulate that the insured be admitted to the hospital,” she adds.

5. Does Hospital Indemnity insurance cover surgeries, including knee replacement?

Again, this varies by provider and state of residence, but most Hospital Indemnity insurance plans cover observation billing, ambulance rides, outpatient surgeries (including knee replacement), and therapy, Bueltel explains. “Some policies even cover doctor office visits and urgent care visits.”

Hospital Indemnity Insurance Can Limit Medicare Observation Billing Effects

6. Can I use Hospital Indemnity insurance without major health insurance?

Yes. “Hospital Indemnity can be used without having health insurance, whether it’s group, individual, or Medicare,” Bueltel says.
It’s important to note; however, Hospital Indemnity is not an Affordable Care Act-compliant product, meaning it is not available on the healthcare.gov marketplace.

7. Does Hospital Indemnity insurance cover voluntary mental health stays?

Coverage varies by provider, but most plans do cover voluntary mental health treatments in a hospital environment, Bueltel says.

8. Can I have a Hospital Indemnity plan if on Medicare?

Absolutely. In fact, those on Medicare are often ideal candidates for hospital insurance to help fill in Medicare Advantage gaps. People ages 65 to 84 make up about one in three hospital visits, according to the Agency for Healthcare Research and Quality, and the cost for an average five-night stay is $14,500. Medicare plans rarely cover this entire cost. With Medicare Advantage, for example, the maximum out-of-pocket cost is $6,700 — more than most Americans have in an emergency fund.

9. What is the difference between Hospital Indemnity and accident insurance?

“The main difference between Hospital Indemnity and accident insurance is that Hospital Indemnity benefits are triggered when you seek medical care in the hospital or through outpatient services that are covered under the plan,” Bueltel says. “That medical care could stem from an injury or sickness. Accident benefits are triggered by qualifying accidents. Benefits are usually paid based on a schedule, so depending on the injury, certain benefits are paid.”

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