How critical illness insurance can help with a high deductible in Iowa: two examples

With a high-deductible health plan, the first several thousand dollars of a hard year are yours to pay. After the deductible comes coinsurance, until you reach the plan’s out-of-pocket maximum. A serious diagnosis can get you there in a month, and it often comes with time off work that no health plan replaces.

A critical illness plan works differently. It doesn’t pay a hospital or a doctor. It pays you a lump sum when you’re diagnosed with a covered illness, whatever your other insurance pays, and you decide where the money goes: the deductible, the coinsurance, the mortgage, the gas to get to treatment.

The two examples below are set in Iowa and use CriticalGuard, a critical illness plan underwritten and administered by Golden Rule Insurance Company, a UnitedHealthcare company. The people and their health plans are fictional. The plan facts come from the carrier’s brochure, including its section for Iowa.

How the plan is built

CriticalGuard has four plans:

• Cancer
• Heart/Stroke
• Cancer + Heart/Stroke, with a separate maximum for each category
• Critical Illness, the full suite, which adds a category for other critical conditions such as ALS, end stage renal failure and major organ transplant

You choose a Benefit Lifetime Maximum Amount, in $5,000 steps. It’s the most the plan pays in a lifetime for one category, per covered person. Each Qualifying Event pays a share of it. Life-threatening cancer, a heart attack and a stroke pay 100%. Cancer in situ, a benign brain tumor and heart illness pay 25%. Skin cancer pays $500.

The brochure sets out the ground rules. Every plan has a 30-day waiting period after the plan effective date. Benefits are paid on First Diagnosis, meaning the first occurrence in your lifetime in most states. They’re a stated amount, paid regardless of the actual expense and regardless of other insurance coverage, and they go directly to you.

Three optional riders cost extra and can only be added when you apply: Wellness, Outpatient Prescription Drug and Telemedicine.

CriticalGuard is a supplement to health insurance and not a substitute for it. The brochure says it is not the Minimum Essential Coverage required by the Affordable Care Act. Both households below kept their health plans.

Hannah in Iowa City: lymphoma and the prescription drug rider

Hannah writes grant applications for nonprofits, on her own, from a small apartment in Iowa City. She buys her own health insurance. Her plan has a $6,500 deductible and an out-of-pocket maximum of $9,000 a year.

What she chose

At 28, Hannah looked at two plans. The full-suite Critical Illness plan starts at $5,000 at her age. The Cancer plan starts at $50,000 at issue ages 18 to 49, and runs up to $100,000. She chose the Cancer plan at $50,000. A larger cancer benefit mattered more to her than the longer list of conditions. Her application asked some medical questions, and she answered them carefully.

She added the Outpatient Prescription Drug rider. It pays $15 per generic prescription fill and $50 per brand-name fill, up to a combined $600 per calendar year, after a 30-day waiting period. The brochure’s overview describes this option as coverage for outpatient provider-administered prescription drugs, so the policy decides which fills count. The brochure also says the exclusion for conditions that aren’t Qualifying Events doesn’t apply to this rider. It isn’t tied to a diagnosis.

Her plan took effect on February 1. When the policy arrived, Hannah used Iowa’s 30-day right to examine. She read it over two weekends, decided it fit, and kept it.

What happened

About 14 months later, in April, Hannah noticed a swollen lymph node in her neck that didn’t go away. A biopsy followed. At 29, she was told she had Hodgkin lymphoma, and her claim was reviewed under the policy’s definition of life-threatening cancer. Chemotherapy ran from April through September.

Her health plan paid for her treatment under its own rules. She paid her $6,500 deductible and $2,500 of coinsurance, and reached her $9,000 maximum by June.

The arithmetic

The brochure asks for notice of a claim within 30 days after the First Diagnosis, or as soon as reasonably possible. Hannah sent the form two weeks after her biopsy results.

• Her Cancer Benefit Lifetime Maximum Amount: $50,000
• Share for life-threatening cancer: 100%
• $50,000 × 100% = $50,000

The rider added its own amount. Over that calendar year, 9 brand-name fills and 14 generic fills counted under it:

• Brand-name: 9 × $50 = $450
• Generic: 14 × $15 = $210
• $450 + $210 = $660, over the yearly limit
• Rider paid: $600, the combined limit for the calendar year

Rider benefits aren’t counted against the Benefit Lifetime Maximum Amount. In all, the plan paid Hannah $50,000 + $600 = $50,600.

Where the money went

• $9,000 for her out-of-pocket maximum: the $6,500 deductible and $2,500 of coinsurance
• $15,000 to replace six months of income, while she took on half her usual work
• $2,400 for rides, parking and meals on treatment days
• $1,200 for gas and groceries when her mother came to stay
• $22,400 kept in savings for the year after treatment

That adds up to $50,000. She put the rider’s $600 into savings too.

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

Her Cancer category is used up. If her lymphoma came back, the plan would not pay another cancer benefit for her.

It covers cancer only. A heart attack or a stroke would pay nothing on the Cancer plan.

The rider stops at $600 a year. At the per-fill amounts, her fills came to $660 that year, and the rider paid $600. The limit starts again each calendar year.

The timing. Her diagnosis came 14 months in, past the waiting period and past the 12-month preexisting conditions limitation.

Doug and Pam in Sioux City: ten days past the waiting period

Doug runs the parts counter at a farm equipment dealer in Sioux City. Pam, 54, is a paraeducator at an elementary school. Their health plan comes through Doug’s job. Each of them has a $6,000 deductible and an $8,000 out-of-pocket maximum a year, and the deductible starts over in January.

What they chose

Doug was 56. His doctor had never found anything wrong with his heart, but his father had died of a heart attack, and that was enough. They chose the Heart/Stroke plan. At issue ages 50 to 64, the maximum runs from $10,000 to $100,000, and $10,000 is guaranteed issue. They chose $35,000 each and answered the medical questions. They added no riders. Their plan took effect on March 1.

What happened

On April 10, forty days after the plan took effect, Doug was unloading a pallet of parts when he felt a crushing pain in his chest and his left arm went numb. A coworker drove him to the hospital. He’d had a heart attack.

Why the date mattered

The waiting period is 30 days after the plan effective date. Doug’s ended at the end of March. The brochure excludes any diagnosis that occurs before the waiting period is satisfied. If his heart attack had come on March 20, the plan would have paid nothing.

The preexisting conditions limitation was still in force, because it lasts up to 12 months after the effective date. It covers conditions you had advice, care or treatment for in the 12 months before the effective date, tests recommended in that time, and symptoms a prudent person would have seen a doctor about. Doug’s last doctor visit had been a routine physical almost two years before, and he’d had no symptoms. If he’d been seen for chest pain that winter, the answer could have been different.

The arithmetic

Pam printed the claim form from the UHC Member Hub the week Doug came home.

• Doug’s Heart/Stroke Benefit Lifetime Maximum Amount: $35,000
• Share for a heart attack: 100%
• $35,000 × 100% = $35,000

Where the money went

Doug reached his $8,000 out-of-pocket maximum within his first month of care. He was off work for eight weeks, and his paid time off covered two.

• $8,000 for his out-of-pocket maximum: the $6,000 deductible and $2,000 of coinsurance
• $5,400 for six weeks of missing pay, at $900 a week
• $2,000 to cover days Pam took unpaid to care for him
• $6,000 set aside for next year’s deductible, since his cardiology follow-ups would continue
• $13,600 kept in savings

That adds up to $35,000.

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

Another Heart/Stroke benefit for Doug. His heart attack paid 100% of the category. A later stroke would pay nothing more. Pam’s $35,000 is untouched.

Cancer. The Heart/Stroke plan pays for heart and stroke Qualifying Events only.

The rodeo. Doug has team-roped at county fair rodeos for years. On plans with Heart/Stroke coverage, the brochure excludes Qualifying Events connected to rodeo sports, along with skydiving, racing a motorized vehicle and a few other activities, and Iowa’s entry doesn’t change that. If his heart attack had happened in the arena, the exclusion could have applied.

What’s different in Iowa

Iowa’s entry in the brochure’s State Variations section changes two things:

• A 30-day right to examine. After your policy is issued, you have 30 days to return it for a refund of the premium you paid. The general rule is 10 days.
• Felonies. The exclusion for the covered person’s commission or attempt to commit a felony applies only if the person is charged.

Everything else follows the general rules: the 30-day waiting period, the 12-month preexisting conditions limitation, the activity exclusions and the rest. Premium rates can change, with at least 31 days’ notice, and the brochure says they won’t change solely because of a claim or a change in your health.

Matching a benefit amount to your deductible

Find your two numbers. Your deductible and your out-of-pocket maximum are on your health plan’s summary. Both Hannah and Doug reached their maximum within weeks. If your deductible starts over each year, a diagnosis late in the year can mean paying it twice.

Add the months you’d be short. Hannah’s lost income was larger than her medical costs. Doug’s missing pay and Pam’s unpaid days, put together, came to $7,400, nearly as much as his $8,000 in medical costs.

Plan for the smaller events too. A 25% event on a $35,000 maximum pays $8,750. On a $10,000 maximum it pays $2,500. If you want even a 25% event to cover your deductible, choose a maximum about four times the deductible.

See what your age allows. For the Cancer, Heart/Stroke and Cancer + Heart/Stroke plans, the range 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. Some smaller amounts are guaranteed issue, but the preexisting conditions limitation still applies.

Apply before you need it. Doug’s plan paid because it had been in force for 40 days, not 20.

The short version

• A high deductible can leave you owing thousands before your health plan pays much. CriticalGuard pays a lump sum on a covered diagnosis, directly to you, regardless of other insurance.
• Hannah’s $50,000 Cancer plan, plus $600 from the prescription drug rider, covered her out-of-pocket maximum and six months of reduced income.
• Doug’s $35,000 Heart/Stroke plan paid because his heart attack came about ten days after the 30-day waiting period ended. Three weeks earlier, it would have paid nothing.
• The plan pays only for the Qualifying Events it lists, subject to the preexisting conditions limitation and the exclusions.
• In Iowa, you have 30 days to look over the policy and return it for a refund of the premium.
• 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.