Nicholas Lazzarini has a pretty good health insurance policy. But as a
self-employed dancer, he says he worries about becoming sick or injured
and incurring extra costs. "Unless you're on a TV show, you don't have
coverage," says the 29-year-old from Van Nuys.
For extra
protection against unforeseen medical costs, Lazzarini decided to buy
two additional policies to supplement his health insurance plan. He
bought a critical illness plan, which will pay a lump sum if he becomes
sick with a serious ailment like cancer or a severe burn, and an
accident plan that will put cash in his pocket should he injure himself.
"If
I'm working at a dance studio where I have to cover myself, it's smart
to have that extra protection in case I can't work," he says.
When
it comes to buying supplement policies for accidents and critical
illnesses, experts urge consumers to shop around, make sure they're
getting only what they need and know how the policy works. Every
insurance plan is different.
By far, the largest and best-known
seller of this kind of insurance is AFLAC — thanks to its huge marketing
campaign fronted by a talking duck.
These supplemental policies
are among a growing menu of voluntary benefits offered by employers and
insurers to help consumers pay their bills in case of a catastrophic
medical event. And they can be used to offset the cost of out-of-pocket
medical expenses.
Unlike health insurance that pays medical bills,
supplemental policies may be used for a variety of expenses such as
baby-sitting, car payments, mortgages and transportation.
Critical
illness plans offer a set cash benefit that is triggered by a diagnosis
such as cancer or heart attack. The cost of an average individual plan
is about $25 per month and cash benefits commonly range from $5,000 to
$50,000.
If you have a heart attack, for example, you might receive a lump-sum payment of $20,000.
A
mid-range accident plan costs $21 per month for an average individual.
Policyholders could receive $350 for each day of hospitalization and
$150 for an ambulance ride required by an accident. The loss of fingers
could yield a lump-sum payout of $5,000.
Many accident plans also
have a life insurance benefit: If a policyholder dies because of an
accident, a payout of, say, $50,000 may be made to his or her family.
Sales
are on the rise. "Accident and critical illness are two areas of
growth," says Anita Potter, research director with LIMRA, an insurance
and financial services research organization. Her firm estimated that
sales of critical illness plans jumped 28% and accident plans rose 14%
in 2013 over the year before.
The
increased popularity of supplemental benefits is partly the result of
employers and insurers cutting back on benefits to keep costs low,
experts say, while medical costs are going up.
"People get worried
about the high deductibles and look to supplement their health
insurance policies with accident and critical illness plans," says
Carrie McLean at eHealth.com, an online health insurance exchange.
At
the same time that medical costs are rising, Americans seem less able
to shoulder the burden. A recent report by AFLAC found that nearly 50%
of workers surveyed said they could afford less than $1,000 if faced
with an unexpected serious illness or accident.
Supplemental
insurance products enable employers to offer people additional financial
protection without much additional cost, says Michael Thompson,
principal with PricewaterhouseCoopers' Health and Welfare Practice.
"Employers
are interested in offering a suite of options to employees to embellish
their benefit programs without adding significant cost to the company,"
he says.
Experts say these policies can be useful but aren't for everyone, and offer a few suggestions before buying these policies.
•Know what you're buying … and what you're not.
Critical illness, cancer-specific, accident and hospitalization
policies, which provide cash payouts if you're hospitalized, are not
comprehensive health insurance. "They are intended to supplement, not
take the place of major medical insurance," says Matthew Owenby, a vice
president with AFLAC.
The cash payouts can be used to cover the
cost of health plan co-payments and deductibles. Typically, though, they
are used to cover daily living expenses, such as gas or groceries,
mortgage or car payments. If you're hospitalized a distance from your
home, the money can be used for child care or a daily fund for family
lodging.
"It gives you an extra layer of coverage to help recover
from the financial pressure of cancer or an accident," Owenby says.
Finally, he adds, look into how quickly the insurer pays claims and how
easy or difficult it is to collect.
•Consider alternatives.
"If your health insurance plan is eligible for use with a health
savings account, that's a great way to set aside money tax-free to use
toward your deductible or other medical expenses," McLean says. For some
people, it may make more sense to fund an HSA than buy an additional
insurance policy.
However, HSA money can only be used for
qualifying medical expenses. "If you receive a payout from one of these
[supplemental] plans, you can use the money for whatever you need. That
could mean paying off your deductible, but it could also mean paying
other household and family expenses while you're in the hospital or
unable to work," McLean says.
•Shop smart. Experts say to pay close attention to plan details before you buy.
For
example, dollar-limit payouts vary from one plan to the next. "I
wouldn't go under $750,000," McLean says. Any major illness or injury
requiring hospitalization can easily lead to hundreds of thousands of
dollars in expenses, she says.
Also, check the list of illnesses
covered by critical illness policies. If you're at high risk for
Parkinson's disease, for example, make sure that your policy covers it.
Lazzarini, the professional dancer, says injuries are a reality in his work, so he'd rather be safe than sorry.
The
extra coverage provided by his accident and critical illness policies
give him peace of mind, he says. "For me, insurance is a precautionary
thing."
healthcare@latimes.com
Zamosky is the author of the book, "Healthcare, Insurance, and You: The Savvy Consumer's Guide."
Saturday, July 12, 2014
Supplemental healthcare policies may relieve some worries
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