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Why Hospital Indemnity Insurance Should be part of Every Coverage Portfolio

Hospital Indemnity Insurance

Surprises may be fun for parties, but not so much for household budgets. Despite all the planning and all the saving, an unexpected expense often throws people's finances for a serious loop.

Hospital indemnity infographic.

That's especially true with healthcare expenses, which are rising at an alarming rate. A stay in the hospital can cost thousands of dollars a day – not to mention the additional costs for tests, medicines, procedures and ambulance transportation.

But it's not just household budgets that are impacted by healthcare expenses. According to the Bureau of Labor Statistics, benefits accounted for nearly 30% of employers' total compensation costs in March of 2021. And there's no reason to think that tide is turning anytime soon.

One-way employers have tried to control benefit expenses is by offering high deductible health plans (HDHP) to their employees. Just as the name suggests, these types of plans require employees to pay out of pocket for medical expenses until they reach a high deductible limit – usually within the $2,500 to $5,000 range. Even when benefits kick in, employees may also be responsible for co-insurance, often around 20 to 30%. Altogether, an employee's out-of-pocket expenses for even a brief hospital stay could easily total in the thousands of dollars, even with medical insurance.

As major medical expenses have continued to rise, and HDHPs have become more prevalent, the market has responded with a variety of solutions to bridge the gaps. But there's one simple option that is often overlooked – hospital indemnity insurance.

How does hospital indemnity insurance work?

Indemnity means protection against damage or loss; simply put, hospital indemnity insurance helps protect an insured's finances from hospitalization expenses. Typically, the policy pays a set benefit amount for each day the insured is in the hospital. Depending on the policy there may be additional benefits paid for the first day of an inpatient stay or admission to intensive care. Some policies even provide coverage for inpatient stays for mental health care and drug and alcohol treatment, and wellness and diagnostic benefits to provide coverage for regular checkups and screening tests.

Since hospital indemnity insurance is employee-paid through payroll deduction, it's a good way for employers to help their teams supplement a high deductible health plan. And if the employer also offers a Health Savings Account (HSA), they can choose a hospital indemnity offering that works with the HSA to provide maximum benefits. Employers and employees should consult with a tax advisor to learn more about HSA compatibility.

Employers can even set up their hospital indemnity insurance offering to integrate with their major medical plan and/or health incentive plans they offer. Hospital indemnity plan design options include choices on the number of days of confinement covered, benefit amounts and how often insureds can receive benefits.

Group Hospital Indemnity from Allstate Benefits

Allstate Benefits offers Group Hospital Indemnity insurance to employers with a variety of flexible options to meet the needs of the business and its employees. Learn more about Hospital Indemnity insurance from Allstate Benefits here.

Disclaimers and notes Accessed 9.18.2020

2Employer Costs for Employee Compensation - March 2021 ( Accessed 7.20.2021

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