| Supplemental Insurance |
| Written by Samuel Blue | |
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The United States government has never provided universal health care, but there was a time not so long ago when the private sector kept the vast majority of Americans healthy at affordable rates. During World War II, businesses facing a labor shortage competed to attract new workers by offering them health benefits in addition to salaries. The practice spread quickly in the postwar years, and even today, most working Americans with health insurance obtain coverage through their employers. However, the cost of health care has grown exponentially, and today, it accounts for some 15% of the Gross National Product. More and more firms are ruthlessly cutting costs in order to survive a brutal recession, and one strategy in this regard is to reduce spending on employee health care and for many, to exit the health care business entirely. This creates a problem for individual consumers, who often cannot afford to cover their own medical costs. The average household may spend anywhere from $200 to $500 on out-of-pocket medical expenses per month.Supplemental health insurance policies can help plug this budget gap while addressing the need for businesses to keep their costs down. Also known as "defined benefit insurance" because they set dollar maximums on the amounts they will reimburse for specific expenses, supplemental policies are popular with both consumers and providers. There are several reasons for this. First of all, supplemental plans are specific and easy to interpret. For example, a policy may cover up to $1000 per day for hospitalization, or psychotherapy at $50 a session for up to twenty sessions. In contrast, major medical policies often set a general lifetime ceiling on dollar benefits, usually in the millions, but remain vague on the specific costs they will cover. The vagueness of many major medical policies leads to confusion, and often-expensive lawsuits between consumers and providers. A second advantage of supplemental insurance is the flexibility and user-friendliness it provides. Consumers remain eligible for the same level of benefits from a supplemental plan no matter how much other coverage they have. Even if major medical covers the bulk of hospital expenses, for example, a supplemental hospitalization plan will still pay out the stipulated $1000 per day in hospitalization costs. Supplemental insurance benefits can therefore help consumers pay the smaller bills that they did not plan for -- out-of-pocket expenses for trips to the hospital, for example -- and they can be a godsend during a temporary cash flow crisis because they help cover rent, utility bills and other expenses of daily life during the times when illness or accident make it impossible to earn income. Furthermore, payouts go directly to the consumer rather than the service provider, so consumers can choose how and when to spend their supplemental insurance payouts. Thirdly, supplemental plans also tend to be affordable, and they pay their benefits in cash. Some supplemental policies cost less than $10 a month, depending on how much coverage the consumer decides to buy. So, is it time for you to buy supplemental insurance? It's a question to think about. Your employer, Medicare, or a major medical plan you've already purchased for yourself or your family may already provide protection in the case of major illnesses and life cycle crises. However, some benefits and emergencies are probably not covered by your existing plans. You may be insured against accidental death, but not disability; against accidents, but not for prescription medication. Supplemental insurance can help plug the holes in policies you already have. It can help you pay for benefits that are not included in your other policies. Supplemental health insurance is especially important if you are working and your employer only provides coverage for catastrophic expenses -- that is, the costs associated with a life threatening illness or a serious accident. Even if you are on Medicare, some health costs are not covered. Hence, Medicare recipients may wish to consider buying a standardized "Medigap" health insurance policy, designed in accordance with Federal and state law to fill the “gaps” in your original Medicare Plan coverage. In order to be eligible, you must have Medicare Part A and Part B, and you will have to pay monthly premiums for both Medicare Part B and for your "Medigap" policy. There are twelve different standardized "Medigap" plans, labeled "A" through "L." Any private company that sells them must identify them clearly as "Medicare Supplement Insurance." Each plan provides a different combination of basic and extra benefits, and therefore costs a different amount depending on the amount of coverage you purchase. "Medigap" plans are individual; if you are married, you and your spouse must buy them separately. That said, you cannot depend on supplemental insurance alone. If you or some one in your family becomes seriously ill or dies in an accident, the expenses are likely to be huge and only major medical or life insurance policies will cover them. Supplemental plans may be worth their weight in gold, but even the best ones do not provide much gold. If you want real protection, you need both major medical and supplemental plans. |
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