Picture this: it’s time for Open Enrollment for health insurance. You can choose group health insurance, ACA, or a short-term medical plan. Then, someone offers you a plan with no deductible (first-dollar benefits) that is cheaper and sounds great. Do you enroll in it? What do you need to know before you purchase one of these “sounds too good to be true” plans? What is it and is it even a health insurance plan?

Disclaimer: Before I dive in too far, I want to stress that this article is not about group/work health insurance or Marketplace/ACA/Obamacare plans. This article specifically discusses health plans for individuals and families under 65. We will discuss group and ACA plans in future articles so feel free to contact us if you would like information regarding these plans at anytime.

So, what is an indemnity plan or one that is often referred to as a $0 deductible plan?

Please remember, we are not referring to ACA, “Obamacare” or Healthcare.gov plans in this article, so please do not get ACA plans with $0 deductible confused with these non-ACA plans.

Common Features of these plans:

• The representative recommending the coverage refers to it as a plan or coverage and does not refer to it as insurance.
• Agents never or rarely use the word insurance since they are usually not able to legally call them insurance.
• The plans or carriers often have cute or patriotic-sounding names.
• They are usually much cheaper than other options you may be looking at.

These health plans don’t require participants to meet a minimum out-of-pocket amount before the company begins paying their medical expenses.

However, they often have a schedule of benefits with set dollar amounts of what the plan pays per day, per instance or per procedure. This means that there are limits on what the carrier will pay, and you can get stuck with a huge bill.

The plan may have limits on the number of times a doctor’s visit or procedure is covered.

They usually do not cover preexisting conditions. If you have health issues, or are an expectant parent (this includes both the mother and father to be), in the process of adopting a child or undergoing infertility treatment, you may not have coverage for these services.^1,2

Some agencies promise that you can pay for a “buy-up” plan if you have health issues that are not covered on this plan. That is a HUGE “red-flag” because those buy-up plans are often three to five times the price of the plan they are currently offering you and often don’t cover the medical expenses you have already incurred since it will be a new plan.

Here is some advice to consider when looking at a plan that sounds “too good to be true”:

• Ask the agent if the plan you are purchasing is an insurance plan or a health plan. Make them put something in writing saying it is insurance and not a health plan or coverage.
• Ask us to review the plan as well to confirm that the product is insurance and not just a plan. Our agents will be 100% honest with you.
• Ask the agent if they are a broker that can offer multiple plans from multiple carriers. This is important because you want someone who can truly offer you multiple options instead of telling you how wonderful one carrier or product is.
• Some plan representatives use the name of their well-known parent company or the network the plan is contracted with to lend credibility to what they are offering. Just because XYZ company owns the company offering the product, that does not mean you are actually buying a plan with the same coverage or network as XYZ company.

Below is a story that illustrates why our agency is so leery of these types of plans.

Several years ago, we received a sad call from a woman who was desperately trying to find help for her and her husband. He had a hobby that was lots of fun and usually very safe, but a freak accident caused him to be severely injured. The accident led to hospitalization and over a week in the ICU, including multiple surgeries to attempt to repair his injuries. After the accident, the wife called their agent, who was not part of our agency. He promised her that they had $1 million in coverage and that the medical bills would be covered. Months later their bills totaled around $400,000, and she assumed she would owe very little of that massive amount. Although they did have one of the best indemnity plans available at the time, their plan covered less than $100,000 of their medical bills. Unfortunately, the only thing we could do to help was to give them advice about working with the hospital to reduce the amount that they owed.

While we have listed several concerns about these plans, that does not mean they should never be purchased. Here are a few reasons you may want to choose one of these plans:

• If you are very healthy and rarely ever use insurance, then this is a way to have some health coverage for a lower price.
• Some plans will pay you and then allow you to negotiate costs with the doctor, clinic or hospital.
• Some do not have a set network, so you can attempt to use any provider in the country.

Our agency offers these types of plans from Golden Rule Insurance Company (UHC), Allstate, Manhattan Life, and other carriers. Please reach out to us to look into these options for you!

So, can we offer indemnity or $0 deductible plans?

Yes, and we will sell you one if you want it, but we will recommend the options that are best for you, which might not include a limited medical plan. Remember, indemnity or $0 deductible plans are not like traditional health insurance plans that usually pay the remainder of the charges after you’ve paid the deductible and max out-of-pocket for the plan. Also, remember that if you want a second opinion on the options you’ve been presented with by someone else, feel free to reach out to our agency for help.

Footnotes

1. Men are considered pregnant as well if a woman is carrying their child.
2. Individuals and families who have pre-existing conditions should talk with a broker about purchasing a health insurance plan through the Marketplace or an employer-provided plan.