Limited-benefit plans, high-deductible plans, health-savings plans
NASHVILLE – If you watch late-night television, you may have seen the ads – health insurance at a low, affordable price. If you or your family is living without insurance, you may wonder if these offers are right for you.
Often these ads are for limited-benefit plans – bare-bones policies that cover specific expenses and have many more limitations than a comprehensive medical plan. These plans might not be your only option, though. That’s why it’s important to educate yourself before purchasing a policy.
The following information from the National Association of Insurance Commissioners (NAIC) will help you evaluate whether limited-benefit health insurance plans or a High-Deductible Health plan can provide the health insurance protection you and your family need.
Limited-Benefit Health Insurance Plans
Limited-benefit health plans are insurance products with reduced benefits intended to supplement comprehensive health insurance plans, not to be an alternative to them. You may have seen these types of plans marketed as Cancer Only, Specific Disease, Hospital Cash or Indemnity plans.
Limited-benefit health insurance plans are not typically required to provide the same level of coverage, so they cover fewer types of medical expenses than a comprehensive policy. These plans also have higher co-insurance percentages, copayments and deductibles than comprehensive plans.
This means a limited-benefit plan will limit the amount of coverage the company will pay per episode of illness, sometimes as low as $1,500 to $5,000 (not counting co-insurance and deductibles paid out of pocket by you).
These policies also provide limited surgical, preventative care, testing and emergency benefits. And with low, maximum-benefit limits called “caps,” it might be possible for you to reach your cap quickly, leaving you responsible for the balance of the bill.
What to Consider With a Limited-benefit health Insurance Plan
Limited-benefit health insurance plans are not replacements for comprehensive health insurance coverage. If you lost coverage under a comprehensive plan and are considering a limited-benefit plan, there are several things you should have in mind when reviewing the coverage offered by a plan:
High-Deductible Health Plans
Another health plan option is a “High-Deductible Health plan” (HDHP). HDHPs provide the same types of coverage as a comprehensive health insurance plan, but only cover catastrophic health care costs. This means you will be responsible for paying much more of the upfront cost before the policy would pay any benefits for eligible medical expenses. HDHPs have a lower premium to compensate for the higher out-of-pocket costs incurred with these high deductibles.
There are two types of HDHPs:
Health-Savings Accounts (HSA)
An HSA is a savings account that allows you to set aside funds for future qualified medical expenses. An insured enrolling in a HDHP with an HSA can deposit funds for health care expenses on a pre-tax basis into the account. Earnings on HSA balances are also not taxable. Withdrawals of HSA funds to pay for eligible health care expenses are exempt from federal and state taxes as well. Unused funds in an HSA at the end of a year can roll over into the next calendar year.
What to Consider With a High-Deductible Health Plan
If you’re considering either type of HDHP, make sure to read the policy form – paying careful attention to the benefits and the limitations of the plan. Review the implications of having a high deductible. For instance, will you have the funds available to pay a large deductible or high medical expense in the event of an unexpected illness? Also, consider whether the tax-saving advantages of an HSA are appropriate for your particular financial situation and contact a tax consultant if you have questions.
Discount health plans are not insurance products, but membership groups that have discount arrangements with local providers for services at a reduced (discounted) rate. These discount programs have limited regulation and can have limited consumer protections.
Marketing for discount health plans can be similar to that marketing for limited-benefit plans, making it difficult to distinguish one from the other. To protect yourself and your money, contact the Tennessee Insurance Division and confirm that both the company and the insurance agent you are working with are licensed in Tennessee. Go to www.tn.gov/commerce/insurance/ or call 1-888-416-0868.
For more tips about choosing health insurance coverage that is right for you and your family, go to www.insureUonline.org.
About The Department of Commerce and Insurance
The Department of Commerce and Insurance works to protect consumers while ensuring fair competition for industries and professionals who do business in Tennessee. www.tn.gov/commerce/
TopicsHealth Insurance, Health Savings Accounts, Health-Savings Plan, High-Deducatable, Limited-Benefits, National Association of Insurance Commissioners, Tennessee Department of Commerce and Insurance
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