United States
Hong KongDental, vision and the supplemental policies
The outline's other policies heading lists eight: dental, vision, cancer, critical illness or specified disease, worksite, hospital indemnity, short-term medical and accident. Most pay a fixed sum on a defined event rather than reimbursing a cost, which is the distinction that separates them from medical expense coverage.
Eight sub-items in one heading, and they look like a miscellaneous drawer. They are not. Six of the eight answer to the same idea: a defined event happens, and the policy pays a stated amount without asking what anything cost.
Sorted by how they pay
| Policy | How it pays | Trigger |
|---|---|---|
| Dental | Reimburses, often on a schedule with categories of service | Treatment received |
| Vision | Reimburses or pays an allowance | Exams, lenses, frames |
| Cancer | Fixed amounts on diagnosis and treatment stages | A named disease |
| Critical illness or specified disease | A lump sum on diagnosis | One of a listed set of conditions |
| Hospital indemnity | A stated amount per day of confinement | Being an inpatient |
| Accident | Scheduled amounts for injuries | An accident |
| Worksite | Varies, sold at the workplace on a voluntary basis | Depends on the product |
| Short-term medical | Reimburses, like major medical, for a limited term | Medical expenses |
The middle block is the exam's target. A hospital indemnity policy pays its daily amount whether the stay cost a fortune or nothing at all, and it pays on top of any other coverage the insured holds. That independence is the whole product.
Why fixed indemnity is not medical insurance
- It does not reimburse a cost, so there is nothing to coordinate with another plan.
- It pays the insured, not the provider.
- The money can be spent on anything: the mortgage, childcare, travel to treatment.
- It is not a substitute for medical expense coverage and cannot be sold as one.
That last line is a conduct point as much as a product point. Presenting a cancer policy or a hospital indemnity plan as though it were comprehensive coverage is a misrepresentation of the benefits of a policy, which the Texas Insurance Code treats as an unfair method of competition.
Dental, which is more structured than it looks
Dental plans usually sort treatment into categories: preventive, basic and major. Preventive care is covered generously or in full to encourage use, basic restorative work carries coinsurance, and major work carries more. Orthodontia is usually separate with its own lifetime limit.
The pattern is deliberate and it is the same reasoning that puts preventive care outside a high deductible plan's deductible. Cheap care now prevents expensive care later, so the plan makes the cheap care easy.
An insured with major medical coverage and a separate hospital indemnity policy spends several days in hospital. The major medical plan pays the bill in full after her deductible. What does the indemnity policy pay?
- Nothing, because the expenses have already been reimbursed
- Its stated daily amount, regardless of what the other plan paid
- The difference between the bill and what major medical paid
- Its daily amount, reduced by any other recovery
Short-term medical, the odd one out
Short-term medical is expense-based, like major medical, but written for a limited period and usually medically underwritten, with preexisting conditions excluded. It fills a gap between jobs or before other coverage starts. It is not comprehensive coverage and, unlike the indemnity products above, it can look like it, which is why it is sold and regulated carefully.
Where it sits
- Section
- V, types of accident and health policies, 16 questions
- Listed as
- G. Other policies, eight sub-items
- Equal largest heading
- With medical expense, also eight
- Our estimate
- 2 or 3 questions, ours and not published
The opinion, and the concession
Do not learn eight products. Learn the fixed indemnity idea once and then note which of the eight use it, which takes about five minutes and covers most of what can be asked. The heading looks like the largest memorization job in the health half and it is one of the smallest, because the products differ by name and not by mechanism.
The concession: short-term medical is the exception to everything above and it is also the product whose regulation has moved most in recent years. The outline lists it in a single line. We would rather flag that a page written to an outline cannot keep pace with a market than pretend the line covers what a Texas broker needs to know about selling it.
Common questions
What is a hospital indemnity policy?
A policy that pays a stated amount for each day the insured is confined as an inpatient, regardless of what the stay actually cost and regardless of any other coverage. The money goes to the insured rather than the provider and can be spent on anything.
Do supplemental policies coordinate with major medical?
Fixed indemnity policies do not, because they pay on an event rather than reimburse an expense, so there is nothing to coordinate. Expense-based coverage such as dental, vision or short-term medical can interact with other plans, which is where coordination of benefits rules apply.
Can a cancer policy replace health insurance?
No, and presenting it as though it could is a misrepresentation of the benefits of a policy, which the Texas Insurance Code treats as an unfair method of competition. A specified disease policy pays only on the named condition and pays a stated sum rather than the cost of care.
How is short-term medical different from the other supplemental policies?
It reimburses expenses like major medical rather than paying a fixed sum on an event, and it is written for a limited period with medical underwriting and preexisting conditions excluded. It looks more like comprehensive coverage than the indemnity products, without being it.