Health insurance can save you and your family from having to file for bankruptcy if you suffer a catastrophic illness or accident. However, sometimes your regular health insurance plan won't cover all of your bills. To make sure you're fully covered, you might want to consider supplemental health insurance, though it has its pros and cons.
Function
Traditional health insurance, though it helps make health care affordable, still includes many provisions that create out-of-pocket expenses for the insured. Deductibles and copayments require the policyholder to pay money out before the insurance begins to pay out. Payment limits mean the insured may be responsible for large sums if a course of treatment exceeds the limit. Supplemental health insurance helps the insured cover those out-of-pocket expenses, reducing the financial hardship of medical care.
Types
Though there are hundreds of slightly different supplemental insurance policies from which to choose, Virginia-based insurance executive Courtney Rogers says that they all fall into two basic categories. A per-incident plan pays out a flat rate for defined events, such as an emergency room visit or a night in the hospital. A schedule of benefits plans has a list of procedures, each with its own dollar amount. After an auto accident, a per-incident plan might pay $50 for the emergency room visit and $100 per night for the hospital stay. A schedule of benefits plan might pay $50 for diagnosis, $25 for X-rays, $50 for stitches, $150 for a broken arm and $25 per night for observation.
Benefits
Supplemental insurance can help pay for the deductibles, overlimit charges and ancillary expenses of medical treatment. Since many injuries and illnesses also include missing work and wages, working families often find supplemental insurance a lifesaver. Because of the payment structure of supplemental insurance, benefits can sometimes exceed the cost of treatment. That extra money can go to help make up lost wages, cover the cost of medication or anything else the family needs.
Considerations
Supplemental health coverage does mean paying an additional premium, which increases your monthly expenditures even if you never have a qualifying medical event. Rogers notes that most supplemental health policies pay out only for accidental or other emergency care, so they rarely help families with general checkups, illnesses or treatment for chronic conditions. Finally, the listed benefits for a supplemental health policy are set without regard for your actual medical costs. Though they will help make the bills, they may not cover the entirety of out-of-pocket expenses.
Expert Insight
Dave Ramsey, financial guru and author of "Total Money Makeover" recommends self-insurance whenever possible. According to Ramsey, if you have the financial resources to afford out-of-pocket medical expenses out of your regular budget, you can do without supplemental health insurance. Rogers adds that large families can benefit best from supplemental health because most policies bill at a "family rate" regardless of the number of children in the family.
References
- "Exam Cram: Life and Health"; BiSys Education; 2008
- Courtney Rogers, Insurance Executive; Richmond, Va.
- "Total Money Makeover"; Dave Ramsey; 2008
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