Making up for a high deductible with critical illness insurance in Nevada: two examples

A high deductible keeps a health plan’s premium down. The trade is that you pay the first several thousand dollars of your care yourself, then a share of the bills after that, until you reach the plan’s out-of-pocket maximum. In a quiet year, that works. In the year of a serious diagnosis, it can mean owing most of that maximum within a few weeks.

Critical illness insurance is one way to plan for that year. It doesn’t pay your doctors. It pays you a lump sum when you’re diagnosed with a covered illness, regardless of what your health plan pays, and the money is yours to put toward the deductible, the coinsurance, the rent or anything else.

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

How CriticalGuard pays

CriticalGuard comes in four plans: Cancer, Heart/Stroke, Cancer + Heart/Stroke, and Critical Illness, the full suite, which adds a list of other critical conditions. You choose a plan, then a Benefit Lifetime Maximum Amount in $5,000 steps. That amount is the most the plan will pay in a lifetime for one category of Qualifying Events. A plan with more than one category gives each category its own maximum, and benefits are per covered person.

Each Qualifying Event pays a set share of the maximum. In the Cancer category, life-threatening cancer pays 100%, cancer in situ and a benign brain tumor pay 25% each, and skin cancer pays a flat $500. In the Heart/Stroke category, a heart attack or a stroke pays 100%, and heart illness pays 25%.

A few rules apply to every plan:

• A 30-day waiting period. A diagnosis made before the waiting period is over is not covered.
• First Diagnosis. In most states, a benefit is paid for the first occurrence in your lifetime, after the waiting period, while the policy is in force.
• A stated amount. The brochure says benefits are paid regardless of the actual expense, and regardless of other insurance coverage.
• Paid to you. You print a claim form from the UHC Member Hub, send it with the information it asks for, and benefits go directly to you.

One notice from the brochure belongs near the top. CriticalGuard is a supplement to health insurance. It is not a substitute for it, and it is not the Minimum Essential Coverage required by the Affordable Care Act. Everyone below kept their health plan. CriticalGuard sat beside it.

Jasmine in Henderson: a benign brain tumor and a $7,000 deductible

Jasmine plans weddings and company parties around Henderson. She works for herself, so she buys her own health insurance. Her plan has a $7,000 deductible. After that, she pays 30% of covered costs until she reaches her out-of-pocket maximum of $9,000 for the year.

She had never had $9,000 in savings at one time. At 32, that was reason enough to look at critical illness insurance.

What she chose

Jasmine chose the Cancer + Heart/Stroke plan. It covers the two categories she thought about most, and each gets its own maximum. At issue ages 18 to 49, the maximum for this plan runs from $50,000 to $100,000. She chose $60,000, which applies to each category.

That amount isn’t one of the guaranteed issue options, so her application asked some medical questions. She answered them carefully. The brochure says incorrect or incomplete answers can void coverage or lead to denied claims. She didn’t add any of the optional riders.

What happened

About two years after her plan took effect, Jasmine started having headaches that didn’t go away. Her doctor ordered an MRI. It found a growth on the lining of her brain. She had surgery a few weeks later, and the tissue showed the tumor was benign.

Her health plan covered the MRI, the surgeon and the hospital stay, under its own rules. Jasmine paid the first $7,000, then her 30% share. She reached her $9,000 out-of-pocket maximum before she left the hospital.

The arithmetic

The brochure asks for notice of a claim within 30 days after the First Diagnosis, or as soon as reasonably possible. Her brother printed the claim form the week of her surgery, and they sent it in together.

A benign brain tumor is a Cancer Qualifying Event that pays 25%:

• Her Cancer Benefit Lifetime Maximum Amount: $60,000
• Share for a benign brain tumor: 25%
• $60,000 × 25% = $15,000

After the claim, her two categories looked like this:

• Cancer: $15,000 paid, $60,000 − $15,000 = $45,000 still available
• Heart/Stroke: nothing paid, $60,000 still available

The brochure says that when a benefit in a category is less than 100%, the rest stays available for a later Qualifying Event, according to the policy’s terms, and never goes above the maximum. A later life-threatening cancer could pay up to the $45,000 left, not a fresh $60,000.

Where the money went

• $9,000 for her out-of-pocket maximum: the $7,000 deductible and $2,000 of coinsurance
• $4,800 to replace what she would have earned from three events she handed to another planner while she recovered
• $1,200 for rides to follow-up visits and help at home in the first weeks

That adds up to $15,000. Her whole year of medical costs was covered, with something left for the work she missed.

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

It pays on a diagnosis, not on bills. CriticalGuard paid because the MRI led to a covered diagnosis, not because of what the scans and visits cost. If the MRI had found nothing the policy covers, CriticalGuard would have paid nothing, however large the bills.

A benign brain tumor pays once. The brochure limits it to one benefit per person, per lifetime.

The preexisting conditions limitation. The policy won’t pay for a Qualifying Event caused or contributed to by a Preexisting Condition, such as a condition you had advice, care or treatment for in the 12 months before your effective date. The limitation lasts no longer than 12 months after the effective date. Jasmine’s headaches began long after she bought the plan, and her diagnosis came about two years in. If she had been seeing a doctor about those headaches in the 12 months before her plan took effect, and the tumor had been diagnosed in her first year, the limitation could have applied.

Ray and Teresa in Reno: one cancer, two deductibles

Ray spent 30 years in the engineering department of a Reno hotel and casino and retired at 61. Teresa, then 59, kept her part-time job at a credit union. They buy their own health plan. Each of them has a $6,000 deductible, then coinsurance up to an out-of-pocket maximum of $9,000 a year. Their plan’s deductible starts over every January.

That last detail was what bothered Ray. A long illness that crossed New Year’s could mean paying a deductible twice.

What they chose

Teresa’s mother and Ray’s brother had both been through cancer, so the Cancer plan was the one they wanted. At issue ages 50 to 64, the maximum for the Cancer plan runs from $10,000 to $100,000, and $10,000 is guaranteed issue at those ages, meaning no underwriting. They chose $25,000 each and answered the medical questions that come with an amount above $10,000. Because benefits are per covered person, each of them has their own $25,000 maximum.

They added one rider, Telemedicine. It gives $0 general physician consultations, unlimited, by mobile app, web or phone, 24 hours a day. Behavioral health and dermatology consultations carry an extra charge. Unlike the plan itself, it isn’t subject to the waiting period. Riders cost extra, can only be added at application, and apply to everyone on the policy.

What happened

Two years after the plan took effect, Ray, now 63, noticed blood in his urine. A urologist ordered a scan and a biopsy. In October he was told he had bladder cancer, and his claim was reviewed under the policy’s definition of life-threatening cancer. He had surgery in November and chemotherapy from December through March.

By the end of December, he had paid his $6,000 deductible and $3,000 of coinsurance, reaching his $9,000 maximum for the year. On January 1, his deductible started over, and the next three months of chemotherapy fell on it.

The arithmetic

• Ray’s Cancer Benefit Lifetime Maximum Amount: $25,000
• Share for life-threatening cancer: 100%
• $25,000 × 100% = $25,000

The plan paid Ray $25,000 in one lump sum. His Cancer category is now paid in full. Teresa’s $25,000 is untouched.

Where the money went

• $9,000 for Ray’s first-year out-of-pocket maximum
• $6,000 for his deductible again in January
• $4,800 to cover three months Teresa took unpaid from the credit union to drive him to treatment
• $5,200 set aside for his coinsurance through the rest of the second year

That adds up to $25,000. The second deductible, the one Ray had worried about, was paid before it arrived.

The Telemedicine rider helped in a smaller way. One night in January, Ray wanted to know if a cold medicine was safe with his other prescriptions. He talked to a doctor on the app at no charge instead of waiting until morning. The Cancer plan also includes the Optum Cancer Resource Service at no added cost, with an oncology nurse who can answer questions and point you to services. The brochure says the Optum programs are not insurance and may require a diagnosis to qualify.

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

It covers cancer only. A heart attack or a stroke would pay nothing on the Cancer plan. They looked at Cancer + Heart/Stroke and chose to keep the plan focused.

Ray’s Cancer category is used up. If his cancer came back, the plan would not pay another cancer benefit for him.

It doesn’t stretch to cover everything. Had Ray’s coinsurance in the second year run past $5,200, the rest would have been theirs to pay.

What’s different in Nevada

The brochure has a State Variations section, and Nevada’s entry changes three things:

• Premium changes. Premium rates can change. The general rule is at least 31 days’ notice; in Nevada, the brochure says you’ll get at least 60 days’ notice of any change. Either way, the premium won’t change solely because of a claim or a change in your health.
• Intoxication. The general exclusion for a Qualifying Event incurred as a result of being intoxicated or under the influence of illegal narcotics or a controlled substance does not apply in Nevada.
• Felonies. In Nevada, the felony exclusion applies only to a felony the covered person has been convicted of, and it doesn’t apply if a covered person is the victim of domestic violence.

Nevada’s entry doesn’t touch the waiting period, the preexisting conditions rule or the free look, so the general rules apply: a 30-day waiting period, the 12-month preexisting conditions limitation, and 10 days after your policy is issued to return it for a refund of the premium you paid.

Matching a benefit amount to your deductible

Both examples worked because the benefit was sized against real numbers. Here is a way to do the same with yours.

Start with your health plan’s own figures. Find your deductible and your out-of-pocket maximum. If your deductible starts over each year, ask what a treatment that crosses into a new plan year would cost you. For Ray, the honest number was one maximum plus one more deductible.

Add the costs that aren’t medical. Lost pay, rides, help at home, the rent that’s due regardless. Jasmine’s missed events cost her more than twice her coinsurance.

Remember the 25% events. A benign brain tumor, cancer in situ and heart illness each pay a quarter of the maximum. If you choose a maximum equal to your out-of-pocket maximum, one of these would cover about a quarter of it. Jasmine’s $60,000 paid $15,000, which was enough for her $9,000 year and her missed work.

Know what’s open to you at your age. The Cancer, Heart/Stroke and Cancer + Heart/Stroke plans run from $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 Critical Illness plan starts at $5,000 at every age, up to the same ceilings. Some smaller amounts are guaranteed issue, depending on age and plan. Guaranteed issue skips the medical questions, but it doesn’t remove the preexisting conditions limitation.

Count each category separately. On a plan with two or three categories, a claim in one doesn’t reduce the others.

The short version

• With a high deductible, a serious diagnosis can cost you thousands before your health plan pays much. CriticalGuard pays a lump sum on a covered diagnosis, directly to you, regardless of other insurance.
• The amount is a share of the maximum you choose: 100% for the major events, 25% for some others, 50% for loss of independent living on the full suite, $500 for skin cancer.
• Jasmine’s 25% benefit of $15,000 covered her $9,000 year and her missed work. Ray’s $25,000 covered a cancer that ran through two deductibles.
• It covers only the Qualifying Events in your plan, after a 30-day waiting period, subject to the preexisting conditions limitation and the exclusions.
• In Nevada, you’ll get at least 60 days’ notice of a premium change, and the intoxication exclusion doesn’t apply.
• It’s 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.