Insurance agents say individuals are buying indemnity plans instead of ACA coverage, which has become far more costly

Sales are growing for a type of limited health policy offering a cheaper alternative to traditional insurance but leaves buyers risking big bills if they have major medical needs.  Known as fixed indemnity plans, the products offer limited help, typically paying set amounts toward the cost of doctor visits, hospital days or other services.

These plans carry restrictions on people with pre-existing conditions, and they aren’t considered true health insurance under the ACA. However, insurance agents say individuals are increasingly purchasing the plans as a substitute for ACA coverage, which has risen in 2018.

More people are using this alternative when they can’t afford anything else which indicates that sales of indemnity products were roughly 10 times higher than in 2017. Many insurers and insurance agents say they have seen recent indemnity sales grow, but many of the products are sold only to those who can attest to being healthy.

Core Health Insurance offers low prices around $200 a month. This plan pays $70 each for up to 10 doctor visits if a patient is sick, and up to $500 a day for a hospital stay, up to 31 days, along with payments toward certain other services. The product doesn’t pay toward hospital care related to pre-existing conditions for the first 12 months it’s in effect.  SASid Insurance Development, works with insurers to design and market plans which reflect a growing breed of indemnity products that can appear closer to traditional health insurance, offering payments toward a wider array of services.

Consumers choosing insurance often struggle to predict their medical costs, which can be unexpected, consumer advocates say. Prices can differ for similar medical services, based on where they are given. As an example, the median charge for care related to gallbladder surgery, performed outside an insurer’s network, can range from around $24,000 to roughly $108,000, according to one expert.

Indemnity Plans Differ Significantly from ACA Health Insurance

  1. They are far cheaper than ACA coverage, with premiums that can amount to roughly a third of the full cost of the health-law plans, though prices can vary widely.
  2. Consumers with lower incomes can get federal subsidies to defray the ACA-plan premiums.
  3. Indemnity products are sold year-round, and their payments toward the cost of care are supposed to be upfront.
  4. ACA plans are generally available only during the fall open-enrollment period and can carry high deductibles.
  5. Patients who only have indemnity plans usually pay a penalty for not having traditional coverage.

ACA Plans Provide:

  1. Far more protection:
    1. Including a mandated annual cap on a consumer’s out-of-pocket spending—a backstop if major health needs strike.
    2. Whereas Indemnity plans leave the consumer on the hook for bills beyond the limited payments, which could amount to tens of thousands of dollars or more.
  2. They are sold to consumers regardless of their health and cover all pre-existing conditions.

In 2014, indemnity plans were required to be sold to consumers only as a supplement to traditional health insurance. Following a court decision, the restrictions were dropped which reopened the sale of stand-alone products.

Today, Anthem Inc. (launched in September 2017), UnitedHealth Group Inc. and Chubb Ltd. (was launched in March 2017) are among those offering indemnity plans that make payments toward a range of medical care (including hospital stays, lab tests and chemotherapy.) Agile Health Insurance hopes to fill a void for consumers seeking more affordable options.  

Another more appealing but limited coverage often closer to traditional insurance is short-term insurance. Term limits are up in the air, so the value remains uncertain on this coverage.  In the end, consumers without access to coverage, or can’t afford it, need to understand the limitations of the plan. 

Source: WSJ

Anthem Inc. – https://www.antheminc.com/Companies/index.htm
UnitedHealth Group Inc. – https://www.uhc.com/
Chubb Ltd. – https://www2.chubb.com/us-en/
Agile Health Insurance –  https://www.agilehealthinsurance.com/