The Affordable Care Act (ACA) was originally implemented to protect people from the skyrocketing costs of health care. But the bankruptcy rate across America remains high - despite how the ACA has contributed to fewer bankruptcies across the country.
Roughly 700,000 people declare bankruptcy each year, with 66.67% of this amount coming from costly hospital bills.
Take Susan, a young mother, as an example:
Susan had to have a Cesarean section when giving birth to her second child. During the procedure, she and the baby suffered an amniotic fluid embolism, which caused her to need multiple plasma and platelet transfusions and a full hysterectomy. While both mother and child survived, the family finances did not. Under the unforeseen circumstances, Susan had to stay longer than expected. And the final hospital bill caused Susan and her husband to file bankruptcy.
Their experience is all too common. People enter the hospital for "routine" procedures and sometimes leave under crushing debt. And while hospitals give lifesaving care to patients, you may find many items on your bill that'll drive up the total cost. In most cases, the final statements are so extensive that patients don’t even question their accuracy.
So how can people protect themselves against high — often inflated — hospital costs?
How hospital charges add up quickly
Hospitals are a business. Patients are charged for everything including incidental expenses.
As examples, the average rate hospitals charge is $15 for a single Tylenol pill. Hospitals can also charge $10 per plastic medication cup, so the cost of each dose of Tylenol is even higher. And every time the hospital staff cleans a patient with an alcohol swab, the cost of the swab is $23. And those tiny alcohol swabs can add up fast.
Other ways patients may see higher costs on their hospital bills:
Mistakes in billing. A medical billing company discovered that 80% of hospital bills they reviewed had errors. As with any other service, mistakes happen. But it seems that billing errors at hospitals are commonplace.
Network nuances. The hospital you chose might be in-network, but some of the providers and associated procedures like radiology techs, lab services, and specialists such as anesthesiologists may not be. If these are used during your stay, you may have to pay for these services out of pocket.
Unnecessary tests. Doctors often ask for tests which are not deemed necessary by the insurance company.
How a hospital indemnity plan can offset certain costs
Many people are finding that hospital indemnity plans can offset certain costs associated with their hospital stays that major medical health insurance does not cover.
The truth is few insurance policies cover 100% of hospital costs. Most contain some form of patient share as a coinsurance percentage or a copay amount. And there are deductibles and items which fall outside of the in-network coverage. In other words, having a single health insurance policy is sometimes not enough to protect you from the high costs of a hospital stay.
What is a hospital indemnity plan?
A hospital indemnity plan is a form of insurance developed that helps you cover additional costs not included in a major medical plan. Unlike major medical, which pays the provider, hospital indemnity plans will pay the person covered.
The way it works is an insurance company can pay cash directly to you (or you can have the hospital submit a claim), so you can use it toward out-of-pocket expenses your health insurance might not cover. This allows you to use the funds as you see fit, whether it's for deductibles, travel, or lost income while you're in the hospital. Simply put: The owner of a hospital indemnity policy is in control of the funds — not the provider.
But it’s important to know this type of plan is a supplement to - not a replacement for - major medical plans.
There are many other terms often used for hospital indemnity plans, which include:
Hospital cash plans
Health benefit indemnity
Fixed indemnity health insurance
Indemnity medical plan
Health benefit indemnity insurance
How does an indemnity plan work?
When you buy a hospital indemnity plan, your insurance company will pay you a fixed amount to pay for your medical bills or use the money to supplement income, child care, or any expenses you faced while hurt or sick.
If you’re admitted to the hospital for a covered service or condition, you'll notify your insurance company. Your insurer will then pay you a set amount based on a predetermined rate listed in your policy.
You'll still want to review your hospital bill to make sure you're not being overcharged - even with a hospital indemnity plan. Doing this will put more money in your pocket for other costs related to the hospital stay.
Is a hospital indemnity plan right for you?
A hospital indemnity plan can work for most people. Hospital expenses average nearly $4,000 a day, with a typical hospital stay costing more than $15,000 total.
So let’s say you have a $6,500 deductible on your health insurance plan and are responsible for 30% coinsurance. This means you would owe a total of $8,200 out of pocket for a $15,000 hospital bill. And this doesn’t even account for lost time at work for you, or travel, food, and parking expenses for your family if they come to visit.
And the reality is: Not many Americans can afford that expense. So hospital indemnity plans can go a long way toward protecting your finances.
6 tips to reduce costly hospital bills
Although a hospital indemnity plan can help you cover many of the direct and indirect costs of a hospital stay, most people would still prefer to avoid needless charges. To help, here are some tips to reduce costly hospital bills.
Watch for billing errors. Ask your provider for the medical billing codes of the procedures you receive so you can make a note of them. Then, request an itemized bill and compare the billing costs after you've been treated. You'll bill probably isn't correct if you see a procedure performed on Thursday, but you checked out on Wednesday. Don't be afraid to challenge any charge that might be an error.
Request only in-network providers. Be sure to let hospital staff know that you only want in-network providers. Most will honor this, if they can. Some states even have laws requiring them to honor your request.
Watch for unnecessary tests. Ask if each test is necessary and covered. If it’s not necessary, you can let the doctor know you don’t want the test. Your doctor may have a good reason for requesting the test, but it's up to you to make an informed choice.
Shop around. Call hospitals in your area and ask for their rates if you have a planned procedure.
Choose the right facility. Consider an urgent care or clinic before going to the hospital. If it's an emergency situation, your best bet is to always call 911. But if not, choosing the right facility might lower your out-of-pocket costs.
Don’t stay any longer than necessary. Extending your hospital stay even one day longer can add hundreds or even thousands to your bill. While it's at the doctor's discretion, it's OK to ask if another night is needed.
The bottom line is that billing mistakes happen: Don't be afraid to question charges on your hospital bill. Be sure to request an itemized billing statement so you can review all charges. And if you're calling the hospital or a customer service line, be sure to get reference numbers and names of the people you speak with. That way, the call can be tracked and the issue can be potentially corrected.
More on hospital indemnity plans
A good hospital indemnity plan can provide you with protection from the high - often hidden - costs of hospitalization. And there are many hospital indemnity plans on the market today, so knowing which is right for you can be difficult.
Our licensed insurance agents are here to talk through your needs and help you find the best hospital indemnity plan to ensure you understand how each will work for you.
Save time and money by finding and comparing hospital indemnity plans in your area.
You can also click here to get more tips on how to reduce healthcare costs