How Does Hospital Indemnity Insurance Work?

Voluntary hospital indemnity helps employees pay for hospital stays, and they can use the coverage for expenses like out-of-pocket medical costs, transportation, childcare, and more. 

Key takeaways: 

  • Many Americans struggle to pay for healthcare services and end up getting into debt.
  • Voluntary hospital indemnity helps employees pay for out-of-pocket and other expenses when they have to stay in a hospital.
  • Benefits include building a financial safety net, an easy sign-up process, direct payment to the worker, and flexibility in how the funds are used.

Medical debt is one of the leading causes of bankruptcy in America. Many people already struggle to pay their monthly living expenses, so it can seem hopeless when they also have to worry about huge medical bills.

Voluntary hospital indemnity benefits provide a solution, allowing employees to get additional financial protection should they need to stay in a hospital because of an illness or injury. These plans provide lots of flexibility, are paid to the employee directly, and can be used for out-of-pocket costs that other insurance coverage won’t cover.

It’s worth digging in a bit deeper into how this benefit works, including how it provides a safety net for employees. This guide will cover everything you need to know about hospital indemnity and how to help employees with the planning process. 

What is voluntary hospital indemnity? 

Hospital indemnity is becoming a hot benefit to add to employer packages. Here are some of the things you need to know about it:

  • This type of supplemental insurance covers the costs of a medical facility stay that may not be covered by a worker’s other insurance plan.
  • Hospital indemnity insurance pays admission costs and additional daily compensation to an employee when they’re staying in a hospital, critical care unit, or rehab facility. 
  • The benefit can be used for any purpose, so many recipients use it to cover copays, general living expenses, or deductibles.

The amount of compensation received depends on the type of facility and how long the worker stays there, but it helps people pay for out-of-pocket costs. These can be extremely high when employees have to stay in a hospital for a few days.

Supplemental benefits like hospital indemnity are often voluntary, but some employers decide to cover the base-level coverage with a voluntary option to scale up.

What are the benefits of hospital indemnity?

People deal with a lot of fear about being able to afford medical bills should something happen to them. One survey found that one in five Americans (46 million people) can’t afford necessary healthcare in 2021, and that around 18% reported someone in their household had “skipped care they needed for cost reasons” during the previous 12-month period.

Hospital indemnity offers a financial safety net to give people peace of mind about healthcare costs. They can use hospital indemnity for medical expenses, transportation to and from the hospital, or childcare services while recovering from illness or injury, among other uses. Recipients can also use it to pay for out-of-pocket costs associated with being hospitalized, on top of what they receive from their medical insurance coverage.

These funds can be used for anything in these situations, which gives workers lots of flexibility in how they allocate this much-needed financial support. Another benefit is that enrollment is very easy, and employees won’t have to answer medical questions or get an exam to get coverage. Payments are made directly to the employee when they need this benefit, and they can still receive the compensation even if their medical insurance covers everything and they have no out-of-pocket costs.

How to help employees plan

Employees may need your encouragement to fully understand how great this supplemental insurance coverage truly is. Make it clear that this flexible benefit will ensure they have a financial safety net should the worst happen. It may help workers to see a tangible example of how the benefit would work. Outline something like the following:

  • An employee needs to stay at a hospital for three days when they have a baby.
  • Their hospital indemnity provides $1,500 for the hospital admission.
  • An additional $200 per day would be provided.
  • The total benefit for this three-day stay would be $2,100, paid directly to the employee.

Seeing how easy it is to sign up for and utilize this benefit will allow employees to find peace of mind. Working with the right insurance provider will ensure that your employees can sign up with ease and get administration support should they need to file a claim. Make sure they understand what their monthly premium will be, how it will be paid, and the process for filing a claim.

Why BeneRe?

The team at BeneRe recognizes that your employees are concerned about paying for their healthcare expenses and need a financial safety net for unexpected medical bills. Hospital indemnity insurance helps them have much-needed funds when faced with a hospital or facility stay. 

An increasing number of employers are deciding to integrate supplemental benefits for extra employee support, and BeneRe wants to help you with the process. Here’s how:

  • We provide accident, critical illness, and hospital indemnity insurance coverage. 
  • We make sure that our policies will be the same or better than an employer’s current coverage, and we won’t move forward if we can’t improve an employee program.
  • If a program gets fewer claims than predicted, you receive all financial upside as the employer in the form of captive distributions. 
  • Underwriting profits are then reinvested in employee benefit programs. 
  • There is zero financial downside for participating employees or for sponsoring employers.

To learn more about BeneRe and our unique voluntary benefits solutions, reach out for a complimentary financial analysis of in-force programs.