Why should I purchase traditional health insurance?

When I have found several limited benefit plans that cost less and appear to have no deductibles?

Limited benefit plans have become increasingly common on the individual market and may seem appealing to those who feel that a high deductible is cost-prohibitive. Before turning to such a plan, however, there are some very important factors to consider.

First of all, most limited benefit plans only pay a flat amount for covered surgeries, often based on the schedule for Medicare Allowance. The trouble is, the actual surgery is just a small part of the cost of a medical stay.

For example, appendectomy surgery typically costs about $2,500 for the actual surgery; however, the hospital bill can range from $25,000 to $40,000, because of all the auxiliary costs involved (overnight stay, anesthesia, surgical equipment, assistant surgeon, services of support staff, etc.) This means that, at best, the limited benefit plan will pay a few thousand dollars toward the surgery, hospital stay, and anesthesia, leaving the patient with potentially tens of thousands of dollars in unpaid medical bills.

While you may be able to negotiate the bill down somewhat, the fact is that even relatively minor surgeries and conditions will prove to be a considerable financial burden. The rhetorical question then becomes: Would you rather have to pay a deductible up front and be liable for a few thousand dollars of the initial costs, or have first-dollar coverage with no deductible but risk severe financial hardship once you receive bills for all of the items you didn’t initially consider?

If your main concern is a severe illness such as cancer, a heart attack or a serious accident, the answer is obvious. Limited benefit plans are not insurance, nor do they purport to be acceptable substitutes. They give the illusion of coverage, but that mirage will quickly disappear in the hour of need.

What Is a Traditional Health Insurance Plan?

Traditional health insurance generally refers to comprehensive major medical coverage that helps pay for a wide range of health care services. Coverage may be purchased by an individual or offered through an employer as part of a group health plan.

Members usually pay a monthly premium to keep coverage active. Depending on the policy, they may also pay a deductible before the insurer begins sharing certain costs, along with copays or coinsurance when they receive care. These expenses vary, so the monthly premium alone does not show what someone may spend during the year.

Traditional health insurance can cover doctor visits, hospital care, prescription drugs, specialist treatment, and preventive care. That broader insurance coverage differs from a limited-benefit plan, which may pay only a set amount for certain services or medical events.

How Traditional Health Insurance Covers Medical Costs

Insurance companies usually negotiate prices with doctors, hospitals, and other providers in their networks, and those rates help determine how much the insurer pays and how much the member owes. They can also reduce the member’s cost before the deductible is met. Out-of-network care may be priced differently and can leave the member responsible for a larger share of the bill.

A deductible is the amount a member may need to pay for certain services before the insurer begins sharing the cost. Depending on the plan and service, copays or coinsurance may also apply. Most comprehensive plans also have an annual out-of-pocket maximum for covered in-network care. Once that limit is reached, the insurer generally pays the remaining cost of covered in-network services for the rest of the plan year.

Members may still face significant medical expenses before reaching that limit. For someone dealing with an illness, injury, or hospital stay, the out-of-pocket maximum can help keep unexpected expenses from continuing to climb.

What to Compare Before Choosing a Health Plan

A lower monthly premium can be appealing, but it may come with a higher deductible, larger copays, or more coinsurance when care is needed.

Before enrolling, check whether preferred doctors, specialists, hospitals, and other medical facilities participate in the network. Check prescription coverage carefully, especially if you take regular medications.

If you expect regular specialist visits, imaging, therapy, or other ongoing care, compare how each plan handles those services. A plan that looks inexpensive upfront may cost more during the year if you use care often.

Look at the out-of-pocket maximum and which services are subject to the deductible. Many comprehensive plans cover certain in-network preventive care without cost sharing, while specialist visits, diagnostic tests, or hospital care may have their own cost-sharing rules.

Whether coverage comes through an employer or an individual policy, compare what is covered, what you may pay when you use care, and what financial protection is available if a major medical need arises. The benefit details can show how the coverage would work when you actually need care.

If you have unknowingly purchased one of these plans and want actual major medical coverage instead, please visit our website at Selected Benefits or call us toll-free at 866.270.6209. We’ll be happy to review your current plan and point out the pitfalls, so you know exactly what you have at all times.