Medicare FAQs: Hospital Indemnity Insurance

What is hospital indemnity insurance?

Often called "GAP" insurance, hospital indemnity insurance pays you money to fill the gaps in your Medicare Advantage HMO or PPO coverage for unexpected hospital inpatient care, ambulance services, physical therapy, outpatient surgeries, and skilled nursing care, as an example. A feature of some hospital indemnity plans is the opportunity to insure against cancer or other critical illnesses, and some plans pay at the first diagnosis.

Hospital indemnity plans provide money in the mail to help pay the unbudgeted out-of-pocket costs you encounter for hospitalization and medical care. You determine the amount of benefit for which the plan charges a premium. Based on conditions of the policy, when the benefit is triggered by an event covered by the policy, the insurance company sends the benefit directly to you to use as you see fit. As insurance, it provides a safety net to catch unannounced medical curveballs that can tax the budget.

Hospital indemnity insurance's premium is in addition to whatever monthly premium your Medicare Advantage HMO or PPO plan would charge. As a Medicare beneficiary, you must still pay your Medicare Part B premium and your share of cost for medical care you receive.

Medicare Advantage plans are required to limit your cost of care to a flat annual "maximum out of pocket" (MOOP). The MOOP is your medical "worst case scenario." This MOOP varies from HMOs (lower MOOPs) to PPOs (higher MOOPs). When your costs reach the plan's MOOP limit, that is generally the most you will pay for medical care for the remainder of the year. Until the MOOP is reached, you pay out of pocket for your share of medical costs.

Indemnity plans can offset your plan's costs for co-pays and co-insurances for your hospitalization and other related medical costs until you reach your plan's MOOP.

Look for next month's frequently asked question: What is the Medicare Donut Hole?

Leah Sugar Kari, licensed insurance agent, specializes in showing Medicare eligible people their insurance options. Reach Leah for comments at (520) 484-3807 or email [email protected]. (TTY users dial 711.)