Create Your Own Health Benefits Package


December 21, 2017

There’s a lot of uncertainty about the Affordable Care Act (ACA) right now, and that is forcing many people to consider their alternatives. As of December 2017, the individual mandate is still in effect, which means that you could get hit with a tax penalty if your coverage is not part of an ACA-compliant plan. But with questions surrounding tax reform and future political maneuvering on healthcare, that may not always be the case. Plus, you may not want or be able to afford the robust coverage that comes from a major medical plan.

It is possible to bundle together your own coverage from the different types of health insurance products that are available. But before you do that, it’s important to understand what each of those products does and whether or not it offers the kind of coverage you need. It also might not be financially smart to bring a whole lot of individual products together when major medical through the ACA might be cheaper depending on your income. A good look at the alternatives can help get you the answers you need.

Fixed Indemnity

Fixed indemnity coverage can be sold on its own or as an add-on to a major medical plan. This type of plan pays a flat, set rate for certain types of medical conditions and procedures. It’s not health insurance and doesn’t meet the requirements of the ACA for minimum essential coverage.

Medical situations that a fixed indemnity plan will cover vary from provider to provider. Some plans will cover yearly check-ups and other wellness activities, while others do not. Some indemnity plans have an annual deductible you must meet before coverage begins, but some providers require relatively small or no deductibles.

You can see any doctor or specialist you like, and you can go to any hospital in any part of the country with an indemnity plan. After your service is complete, you will get a bill from the medical professional or facility for services rendered. You submit that bill to your indemnity company and then you get reimbursed for whatever your plan covers. For example, if your plan covers $1,000 per day for hospitalization and you were in the hospital for five days, then you would receive a check for $5,000.

Indemnity plans can be convenient because you can choose where you get medical attention and who you get that attention from. But keep in mind that these plans aren’t health insurance in the usual sense of the word. You’ll get paid for covered services, like a hospital stay or a broken leg, but you’re not getting traditional coverage. You can use the money from a fixed indemnity payout for anything, too, which may help you cover nonmedical bills while you recuperate.

Short-Term Health Coverage

Short-term health insurance covers specific medical situations, and it only lasts for a maximum of three months under current rules. Many people like short-term insurance because it is relatively inexpensive compared to a fully compliant ACA plan. In 2016, the average individual paid $110.00 per month for short-term insurance, while a family paid only $276.00 per month.

Short-term insurance has varying deductibles, as do all health plans, with corresponding premiums. The more you pay in premiums, the lower your deductible will be, and vice versa. Short-term insurance does not typically cover pre-existing conditions, nor does it offer any coverage for maternity needs or other pricier healthcare. Some plans offer wellness visits, but preventive care typically isn’t included under short-term plans. The primary coverage offered by short-term insurance is emergency care, doctor visits and hospitalization.

While short-term insurance sounds convenient for healthy people, these plans also won’t keep you from getting hit with the fee for not having health insurance. They’re good for filling gaps between major medical coverage or for those who are in good shape, health wise, and just want something in place for unexpected medical bills.

Dental and Vision

There are many different options available for dental and vision coverage through a wide variety of carriers. Dental and vision benefits aren’t usually included under major medical plans, except for emergencies, so even people with a regular health insurance plan would still need to shop for these ancillary benefits on their own. Under the ACA, dental and vision coverage for children is considered an essential benefit and must be covered under major health plans, but not for adults.

Disability Insurance

Short and long-term disability insurance pays a portion of your income if you’re injured and cannot go back to work. The good thing about disability insurance is that it’s relatively inexpensive. In most cases, your monthly disability insurance premium will only cost between one to three percent of your annual income. If you make $40,000 a year, then you would pay between $400 and $1,200 for a whole year of coverage, which makes disability one of the more cost-effective insurance options.

Critical Illness Coverage

Critical illness coverage is not a part of most major medical plans, but it is a good idea to consider it. This type of coverage pays a lump sum for qualifying critical illnesses, most notably heart attacks, cancer and strokes. Policies typically have a lifetime payout limit for these events, and it’s possible to max out your payout amount with one diagnosis. Qualifying events also include situations like comas, paralysis, blindness, hearing loss and major organ transplants. Coverage for these and other critical illnesses varies by insurer and plan type.

Costs for critical illness coverage can vary depending on your age, gender and lifestyle habits – obesity and smoking can raise premiums. As an example, a 45-year-old man who smokes can expect to pay as much as $1,020 a year for critical illness coverage. Meanwhile, a 45-year-old woman who smokes would pay around $750 per year for the same $30,000 policy. How much you’ll pay depends on a variety of factors, but the benefits can be worth the investment. Payouts for critical illness coverage cover anything you want them to. They’re paid directly to you, meaning you can use them for prescription drug costs, medical bills that your insurance doesn’t cover, mortgage payments while you recover or a trip to Spain. The cash is yours to use as you see fit, which can be helpful when you’ve been diagnosed with a life-altering illness.

Building a Plan – Is It Worth It?

Should you create your own health benefits package? Healthy Americans can avoid high premiums for major medical plans by putting together a package based on any of the above options, and if you don’t need a lot of medical care, doing so could save you money even if you have to pay the individual mandate for not having major medical coverage. But this approach doesn’t work for everyone. A young couple starting a family, for example, is going to take on a lot of medical costs that might not be properly covered by a piecemeal approach to health insurance.

To figure out if this strategy will work for you, determine your health insurance needs for the coming year, and then compare your needs to what the alternatives have to offer. Keep in mind that the deductibles for these alternatives are relatively low compared to exorbitant deductibles for average ACA plans. Young and healthy people, in many cases, can benefit financially by putting together their own health plan with alternative products.