When your deductible is high: two Arizona critical illness insurance examples

A health plan with a high deductible asks you to carry the first part of any big year yourself. Before the plan pays much, you may owe several thousand dollars, and then a share of what comes after, up to the plan’s out-of-pocket maximum. If a serious diagnosis also keeps you from working, the two costs arrive together.

A critical illness plan is built for that moment. When you’re diagnosed with a covered illness, it pays you a lump sum, regardless of what your other insurance pays. You can put it toward the deductible and everything else the diagnosis brings.

The two examples here are set in Arizona and use CriticalGuard, a critical illness plan underwritten and administered by Golden Rule Insurance Company, a UnitedHealthcare company. The people, their health plans and their bills are invented. The plan facts come from the carrier’s brochure. One of the two stories includes a claim the plan did not pay, because that happens too, and it’s better to know why before you buy.

The plan in brief

CriticalGuard comes in four plans. The Cancer plan and the Heart/Stroke plan each cover one category. Cancer + Heart/Stroke covers both, each with its own maximum. The full-suite Critical Illness plan adds a third category of other critical conditions.

You choose a Benefit Lifetime Maximum Amount in $5,000 steps. It’s the most the plan pays in a lifetime for a category. Each Qualifying Event pays a share of it:

• Cancer: life-threatening cancer 100%, cancer in situ 25%, benign brain tumor 25%, skin cancer a flat $500.
• Heart/Stroke: heart attack 100%, stroke 100%, heart illness 25%.
• Critical Conditions, on the full suite: Advanced Alzheimer’s Disease, ALS, coma of at least 7 consecutive days, end stage renal failure and major organ transplant at 100%, and loss of independent living at 50%.

The brochure says benefits are paid regardless of the actual expense and regardless of other insurance coverage. You claim with a form from the UHC Member Hub, and benefits are paid directly to you.

Two rules shape every claim. There is a 30-day waiting period after the plan effective date. And there is a preexisting conditions limitation, explained in the first story.

Above all, CriticalGuard is a supplement. The brochure says it is not a substitute for comprehensive health insurance and is not the Minimum Essential Coverage required by the Affordable Care Act.

Denise in Tucson: a guaranteed issue plan, one claim paid and one not

Denise is a self-employed bookkeeper in Tucson. She buys her own health plan. It has an $8,000 deductible and an out-of-pocket maximum of $9,500 a year, and the deductible starts over every January.

What she chose

At 60, Denise wanted a plan with no medical questions. On the full-suite Critical Illness plan at issue ages 50 to 64, a maximum of $5,000 or $10,000 is guaranteed issue, which means no underwriting. She chose $10,000, close to her deductible, and her plan took effect on April 1. She also added the Wellness rider, which pays $75 for a covered wellness exam or procedure, one per calendar year, after the same 30-day waiting period as the plan.

What Denise didn’t think about was February. That month she had told her doctor about some changes in her digestion, and her doctor recommended a colonoscopy. It was tax season. She put it off.

The claim that wasn’t paid

Denise had the colonoscopy in August, about five months after her plan took effect. Her doctor removed a polyp, and the lab found cancer in situ.

On paper, the arithmetic would have been:

• Her Cancer Benefit Lifetime Maximum Amount: $10,000
• Share for cancer in situ: 25%
• $10,000 × 25% = $2,500

The plan paid $0. Here is why.

The brochure’s Preexisting Condition definition includes any sickness or condition for which a diagnostic procedure was recommended in the 12 months before your effective date, if it results in care or treatment after the effective date. It also includes symptoms that would have led an ordinarily prudent person to seek care in those 12 months. Denise’s colonoscopy was recommended in February, for symptoms she’d already noticed, and it led to care in August. The policy won’t pay for a Qualifying Event that results from a Preexisting Condition while the limitation lasts, and the limitation lasts up to 12 months after the effective date. Hers ran through the end of the following March.

Guaranteed issue didn’t change that. It skips the medical questions, but the brochure says all plans are subject to the preexisting conditions limitation. Arizona’s entry in the State Variations section doesn’t change this rule, so the general 12-month version applies.

Her health plan still covered the colonoscopy and the polyp removal, after her deductible. That year, she paid those costs from savings.

The claim that was

The Wellness rider paid $75 in October for her flu shot, and another $75 the next January for her annual physical: one exam in each calendar year.

The following November, about 19 months after her plan took effect, Denise had a stroke. By then the preexisting conditions limitation had ended, and the stroke had nothing to do with her colon. She sent in the claim form within the 30 days after the First Diagnosis that the brochure asks for.

• Her Heart/Stroke Benefit Lifetime Maximum Amount: $10,000
• Share for a stroke: 100%
• $10,000 × 100% = $10,000

Where the money went

• $8,000 for her deductible
• $1,500 of coinsurance, reaching her $9,500 out-of-pocket maximum
• $500 for a shower chair and a grab bar for her first weeks home

That adds up to $10,000. It covered her medical share for the year and almost nothing else. Denise couldn’t work for six weeks, and none of that was covered. A $10,000 plan sized to her deductible did exactly that much.

What the plan didn’t pay, or wouldn’t have

The cancer in situ, for the reason above.

A second Heart/Stroke event. Her stroke paid 100% of that category. A later heart attack would pay nothing more.

Anything beyond the stated amount. Her bills could have been twice as large, and the plan would still have paid $10,000.

Omar and Lena in Chandler: a $500 benefit, then the rest of the category

Omar teaches high school chemistry in Chandler. Lena is a dermatologist in a group practice. Their health plan comes through her practice. Each of them has a $5,000 deductible and a $7,500 out-of-pocket maximum a year, and the deductible starts over in January.

What they chose

At 46 and 44, they chose the Cancer + Heart/Stroke plan. At issue ages 18 to 49, its maximum runs from $50,000 to $100,000. They chose $70,000, which applies to each category, for each of them. That meant answering medical questions. They added no riders.

The first claim

About 14 months after their plan took effect, Lena noticed a spot on Omar’s shoulder. She took a biopsy at her clinic, and she was the doctor who gave him the diagnosis: a basal cell skin cancer. The claim was reviewed under the policy’s definition of skin cancer.

Under the brochure’s general rules, that would be a problem. Its general exclusions include any diagnosis made by you or a member of your immediate family or household. Arizona’s entry says that exclusion does not apply. So the claim went in.

Skin cancer pays a flat amount from the Cancer category:

• Skin cancer benefit: $500
• Omar’s Cancer category: $70,000 − $500 = $69,500 still available

Skin cancer is limited to one benefit per person, per lifetime.

The second claim

Two years later, a scan for back pain found a mass on Omar’s kidney. In September, at 49, he was told he had kidney cancer, and the claim was reviewed under the policy’s definition of life-threatening cancer. He had surgery in October and follow-up treatment that ran into the new year.

Life-threatening cancer pays 100% of the maximum. But the brochure says that when an earlier benefit in a category was less than 100%, the rest stays available, and payments never go above the maximum. So:

• 100% of the Cancer maximum: $70,000
• Already paid from the Cancer category: $500
• Paid for the kidney cancer: $70,000 − $500 = $69,500
• Total from Omar’s Cancer category, across both claims: $500 + $69,500 = $70,000

Where the money went

• $7,500 for Omar’s out-of-pocket maximum in the year of his surgery
• $7,500 for his out-of-pocket maximum again the next year, when his treatment continued
• $14,000 to replace his pay for the rest of the fall semester, after his sick days ran out
• $2,000 for his mother’s flights and a month of groceries while she stayed to help
• $38,500 kept in savings

That adds up to $69,500. Two full out-of-pocket maximums, back to back, came to $15,000, and they were covered before the second one began.

What the plan didn’t pay, or wouldn’t have

Another cancer benefit for Omar. His Cancer category is now paid in full. His Heart/Stroke category is untouched at $70,000, and so are all of Lena’s.

The medical bills themselves. Their health plan paid the surgeon and the hospital. CriticalGuard paid Omar.

Activities on the exclusion list. On plans with Heart/Stroke coverage, the brochure excludes Qualifying Events connected to activities such as skydiving, racing a motorized vehicle, rodeo sports, and being paid to ski or climb. Arizona’s entry leaves those exclusions in place.

What’s different in Arizona

Arizona’s entry in the brochure’s State Variations section is short:

• A diagnosis by family. The exclusion for a diagnosis made by you or a member of your immediate family or household does not apply. That’s what kept Omar’s $500 claim in play.
• AIDS. The exclusion for a Qualifying Event caused directly or indirectly by AIDS or an AIDS-related condition does not apply.
• Incarceration. The exclusion applies only to a state or federal prison, not to other detention facilities.

Everything else follows the general rules. The waiting period is 30 days. The preexisting conditions limitation looks back 12 months and lasts up to 12 months. You’ll get at least 31 days’ notice of a premium change, and premiums won’t change solely because of a claim or a change in your health. After your policy is issued, you have 10 days to return it for a refund of the premium you paid.

Matching a benefit amount to your deductible

Start with your deductible and your out-of-pocket maximum. Then ask how many of them a long illness could cost. Omar’s treatment crossed New Year’s, so his honest number was two maximums.

Add what isn’t on a medical bill. Lost pay, help at home, travel. Denise’s plan covered her medical share and none of her six weeks without work.

Mind the 25% and $500 events. Cancer in situ, a benign brain tumor and heart illness pay a quarter of the maximum. Skin cancer pays $500. Each of these comes out of the same category maximum as the 100% events.

Check your age range. For the Cancer, Heart/Stroke and Cancer + Heart/Stroke plans, the maximum is $50,000 to $100,000 at issue ages 18 to 49, $10,000 to $100,000 at 50 to 64, $5,000 to $75,000 at 65 to 74, and $5,000 to $50,000 at 75 to 90. The full suite starts at $5,000 at every age.

Buy before you need it. Denise’s story is the reason. A recommendation for a test, or symptoms you’ve noticed, can make a later diagnosis a Preexisting Condition. Guaranteed issue doesn’t remove that limitation.

The short version

• A high deductible can mean thousands of dollars of your own money before your health plan pays much. CriticalGuard pays a lump sum on a covered diagnosis, directly to you, regardless of other insurance.
• Denise’s $10,000 plan paid $10,000 after a stroke, which covered her out-of-pocket maximum. It paid nothing for a cancer in situ tied to a test recommended before her plan began.
• Omar’s $500 skin cancer benefit and his $69,500 kidney cancer benefit together used his $70,000 Cancer maximum, and covered two years of out-of-pocket costs.
• In Arizona, a diagnosis made by a family or household member isn’t excluded. The waiting period, the 12-month preexisting rule and the 10-day free look follow the general rules.
• CriticalGuard is a supplement, not health insurance, and not Minimum Essential Coverage.

These are fictional examples. The policy sets the full terms, and actual benefits, underwriting rules and availability depend on carrier guidelines and state regulations.