Worksite, hospital indemnity, short-term medical, and accident policies

Four products, one idea: filling gaps

Major medical coverage is built to pay most of the cost of serious care. The four products in this lesson do something narrower. Three of them pay a limited, defined benefit for a defined event, and one of them is a way of selling coverage rather than a type of coverage. Keep them straight by asking two questions about each: what triggers the payment, and how is the amount decided?

Worksite (voluntary) insurance

Worksite marketing sells individual or group coverage to employees at their place of work. The defining features:

• The employer allows access and handles payroll deduction, but the employee pays the premium. That is why it is also called voluntary benefits.
• Enrollment usually happens during a set window, often with simplified or guaranteed issue, so few health questions are asked.
• The products are typically supplemental: accident, hospital indemnity, cancer or critical illness, disability income, and life insurance.
• Many worksite policies are portable: the employee can keep the coverage by paying the insurer directly after leaving the job.

Worksite is a distribution method. A worksite accident policy is still an accident policy.

Hospital indemnity

A hospital indemnity policy pays a fixed amount per day (or per admission) while the insured is confined in a hospital, for example 200 dollars a day up to a stated number of days.

• The benefit is not tied to actual medical bills. It pays the stated amount whether the stay cost a little or a lot. In insurance law, "indemnity" simply means the benefits promised.
• It is normally paid to the insured, who may use it for anything: deductibles, lost income, child care.
• It usually pays regardless of other coverage, so it supplements major medical; it never replaces it.

Short-term medical

Short-term medical (short-term, limited-duration) insurance is temporary expense coverage for a gap, such as between jobs or during an employer's waiting period.

• It reimburses actual medical expenses after deductibles and coinsurance, like a stripped-down major medical plan.
• It is medically underwritten and commonly excludes pre-existing conditions.
• It is not renewable as of right, and its length is capped by federal and state rules. Those caps have changed several times, and some states restrict or effectively bar the product.
• It is not required to meet the Affordable Care Act's essential-benefit and guaranteed-issue rules, so it is not a substitute for comprehensive coverage.
• New York effectively bars it. State law requires individual medical expense coverage to be offered to all applicants, community rated, and without pre-existing condition exclusions, so underwritten short-term plans are generally not available here. A New Yorker facing a gap usually looks to continuation of group coverage or an individual plan instead.

Accident-only policies

An accident policy pays only for losses caused by an accident. Losses caused by sickness are excluded.

• Benefits may be scheduled (a set amount per fracture, emergency visit or dislocation) or medical expense reimbursement up to a limit.
• Accidental death and dismemberment pays a lump sum: the principal sum for death or loss of two members, and a smaller capital sum (often half) for loss of one hand, foot or eye.
• Common exclusions include intentionally self-inflicted injury, war, and injury while committing a felony.
• Blanket accident policies cover a changing group, such as a team's players or a school's students, without naming each person.

Why regulators watch these products

Limited benefits are legitimate, but they are easy to misunderstand. Insurance regulators may set minimum standards to eliminate coverages so limited that they have no substantial economic value, and to require full and fair disclosure in their sale. A producer must never present any of these four as a replacement for major medical coverage.