Here is an example of using a low cost ancillary coverage to minimize your financial/out-of-pocket costs from a Medicare Advantage plans.
Example #1
The insured has a UHC CO-05 Medicare Advantage plan for 2026. This is a HMO-POS plan. The premium is $0.00/mo.
The copay to see a Primary Care Physician is $0.00; to see a specialist the copay is $40.00 per visit. The inpatient hospital copay per admission is $450/day for a maximum of 6 days. There is no copay for days 7 and beyond.
The out-of-pocket maximum (OOP) for the plan’s medical costs is $5400.
So, considering that the cost of the plan is $0.00/mo, is there an inexpensive way to protect the member from the higher cost of the OOP or for accumulated higher copays??
In other terms, what are the copays of this plan that might aggregate to a high burden of costs? Might that not that be a hospital stay for multiple days? Rather than fixating on the OOP Max of $5400 (see the footnote below for perspective), isn’t it more likely that a hospital stay would create such a situation?
Let’s look at a case where a 65-year old member is admitted to the hospital for a procedure and is formally admitted for a total of 5 days. In this instance the inpatient hospital total cost would be $2250 ($450 copay x 5 days). How could we cover that $2250 for a low cost? What would be the cost of a Hospital Indemnity plan that would cover such expenses?
Let’s see what the cost of an indemnity insurance plan to protect against the OOP exposure of $2500 per year — which would be effectively protect a member against something along the lines of 94-95% of outlays for medical costs. We’ll use the copays from the Medicare Advantage plan detailed above. What we would trying to provide for is financial protection for a OOP outlay around $2250-2500 per year.
An Advantage Plus Elite plan from Guarantee Trust Life providing this sort of coverage would only cost about $27/MO. [Adding a per incident $5000 rider for accidents would only add about $2.31 and covering an ambulance only adds about $1.68.] In short, a member could cover their financial risk for a 5 day hospital stay under the MA plan for as little as $27/months. Does that seem like a good idea?
Footnote** What is the likelihood of facing costs on the order of the OOP for the plan ($5400). Taking statistics from large numbers of people, the average OOP costs for health care in a given year exceeding $2500 are in the 6-8% range; exceeding $5000, are in the range of 1-2%. Higher costs are obviously going to apply to smaller numbers of people.
While it is not possible to actuarially predict the chances of any single individual spending a specific amount of OOP for health care, if we apply these ranges for the sole purpose of evaluating whether purchasing additional insurance makes sense for a person, these ranges can be of help.