Let’s Buy Insurance to Cover the Deductible on Our Health Insurance

For every problem, there’s a product.

My current Bronze health insurance plan includes a $245.69 monthly premium (up from $219.38 in 2015), a $5,250 deductible, and a $6,100 out-of-pocket maximum.

As I wrote during last year’s Open Enrollment:

In other words, I’m paying $2,948.28 over the course of the year for the privilege of only having to pay $6,100 towards any medical costs.

But as the saying goes: for every problem, there’s a product. (I just made up that saying, but I think we can all agree it should be real.)

The New York Times reports that more and more Americans are buying insurance to cover the deductible on their insurance. (Take a minute and sit with that idea. Think about what it means.) Buy a critical illness insurance policy, for example, and you’ll pay a little every month—but they’ll help cover your health insurance deductible if you become critically ill.

The product, known as critical illness insurance, promises to pay a lump sum, anywhere from $5,000 to $100,000, after someone receives some sort of dreaded diagnosis, like cancer, a heart attack or a stroke. And the coverage is not terribly expensive; if you are in your 40s, it might cost $25 to $50 a month.

Insurance for Critical Illness May Add Security, but at a Cost

As with nearly everything else health-insurance-related, these critical insurance plans are designed to benefit both you and your employer:

“Quite honestly, these high-deductible plans are a source of initial employee stress,” said Barry Schilmeister, a principal in the health and benefits business at Mercer, a human resources consulting firm. “And it seems as though these plans are helping a certain group of employees feel a little bit better about signing up for a plan that has a high deductible, at least in certain cases where the employee is afraid they will have a large out-of-pocket cost in those kinds of not-frequent situations.”

I cannot quote the entire article here, so I hope you’ll take a few minutes to read the whole thing. Here are a few of the highlights:

• Around 1.2 million critical illness policies were sold in 2014.
• If you are more worried about expensive accidents (like broken bones) than you are about critical illness, there are other supplemental insurance policies to help you cover those potential expenses. After all, you wouldn’t want one insurance policy to provide for every possible healthcare need, right? That would be a ridiculous idea.
• Yes, critical illness insurance will look for ways to deny your claim, such as “your cancer isn’t large enough.” (SERIOUSLY. PLEASE READ THE ENTIRE NYT PIECE.)

I’ll end with a NYT quote from Jackson Williams, the Consumer Liaison Representative of the National Association of Insurance Commissioners:

“What concerns me is that these products are being marketed as being helpful to people’s personal finances in the event they have some sort of illness and need to pay their outsized deductible. But I would vehemently disagree that these products are very good at addressing that problem.”

Have any Billfolders purchased critical illness insurance or a similar supplementary insurance policy? How much are you paying every month, and how much of your deductible will it cover? If you had the option to purchase supplementary insurance and chose not to, what were the factors involved in that decision?

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