A Healthy Medical Insurance Plan includes Supplements

While primary medical plans are extremely valuable, in many cases the benefits paid cover only a fraction of the true cost of a major illness or injury. For instance, a person who suffers a severe heart attack can expect to experience a lengthy hospital stay, followed by a period of recuperation at home or in an extended care or rehabilitative facility. A primary medical plan will cover a significant portion of the hospital and physician costs, but the insured is likely to be responsible for some expenses. Depending on the terms of the plan, these expenses can be substantial.

Furthermore, an individual experiencing a health crisis such as a heart attack can expect to be absent from work for some time. A disability plan usually replaces only 60 percent to 70 percent of wages, and not everyone has disability coverage. This disruption to an individual's income stream, combined with the added medical expenses, can devastate a family's financial well-being, and can even force tough decisions about treatment options.

The prospect of experiencing a severe health calamity is not as uncommon as one might think. According to one study by the National Heart Lung and Blood Institute, 1.2 million Americans have heart attacks each year. And the American Cancer Society predicts more than 1.6 million new occurrences of cancer annually in the U.S., with men accounting for a slightly higher percentage than women.

Fortunately, insurance products are available that supplement a primary medical plan. Usually available to employees on a voluntary basis and at group rates, these products can fill gaps in traditional health insurance coverage such as the indirect costs of an illness or injury. Surprisingly, the indirect costs can sometimes outweigh the direct cost of medical care.

The following provides an overview of the types and benefits of supplemental medical insurance products. Remember that different carriers may market similar products under various names, and that the specific benefits provided may vary.

Critical illness insurance usually pays a cash benefit upon diagnosis of a life-threatening disease or condition, such as cancer, heart attack, stroke, or the need for an organ transplant. The benefit can be used as the insured -- or survivors -- see fit. For instance, the benefit may be used to pay for health care from an out-of-network provider under the primary plan; experimental treatment not covered by the primary plan; indirect costs associated with medical treatment, such as transportation, lodging, and child care; as well as lost income.

Some carriers offer disease-specific insurance. The most well known among these products is cancer insurance. Depending on the way the policy works, specific disease insurance may pay a cash benefit upon diagnosis, and/or may provide coverage beyond the primary medical plan for treatments associated with the disease, such as radiation and chemotherapy in the case of cancer insurance. Some cancer insurance carriers provide disease management services through a health care professional with expertise in oncology.

Catastrophe medical insurance provides coverage that kicks in after the primary medical plan has run out. Although many primary medical plans have high lifetime limits, some do not. This is especially true of those purchased with economy of premium in mind. Catastrophe plans carry a high deductible, but typically all medical expenses paid both by the insured and the insured's primary plan count toward the deductible. In light of the high cost of health care, a low-limit primary plan can be easily exhausted. Consider the medical costs associated with a premature baby or the trauma of a major automobile accident. Catastrophe insurance provides much needed benefits for all of these types of occurrences.

Hospital indemnity insurance supplements the primary medical plan if an illness or injury requires a hospital stay. Depending on the policy terms, benefits may be paid for specified hospital procedures or on a cash per diem basis.

With today's skyrocketing costs of medical care prompting employers to study how health insurance is offered to employees, voluntary supplemental medical coverage may be an appropriate offering for your workplace. Adding supplemental medical coverage to an umbrella of voluntary benefit offerings can bring value as well as flexibility to your employee benefit package. Remember that coverages vary by carrier, and by state. Speak with your insurance agent to learn which supplemental insurance products provide the coverages that best suit your needs.

Most Popular Benefits

The most in-demand voluntary benefits continue to be those that supplement core medical, life, or disability insurance coverage, according to surveys. These include dental, critical illness, specific illness, hospital supplemental, medical supplemental, disability buy-up, and supplemental life coverage. However, demographic trends are also contributing to growing interest in long-term care and financial planning products.

As more people are faced with their parents' elder care needs, they begin to appreciate the cost of extended care and anticipate what their needs may be in a few years. And, many mid-career employees face the double crunch of saving for retirement at the same time they are financing college education for their children.

Be certain to consider ancillary options when building your medical insurance plan.

Established in 1949, HBK CPAs & Consultants (HBK) offers the collective intelligence of more than 400 professionals in a wide range of tax, accounting, audit, business advisory, valuation, financial planning, wealth management and support services from offices in Pennsylvania, Ohio, New Jersey, and Florida. HBK professionals deliver industry-specific expertise in manufacturing; healthcare (including long-term care); real estate and construction; automotive dealerships and not-for-profit organizations. HBK combines the technical resources and expertise of a large national accounting and professional consulting firm with the personalized attention of a local company.

About the Author(s)

Mike is a Principal in the Alliance, Ohio office of HBK CPAs & Consultants and has been with the firm since 1979.

Mike has extensive experience in manufacturing, estate and trust planning, tax planning, business and succession planning and general business consulting. He provides accounting services to closely-held businesses and individuals.

Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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