When a high deductible meets a serious diagnosis: two North Carolina examples

A high deductible is easy to live with until the year it isn’t. A heart attack or a cancer diagnosis can put you at your deductible within weeks, and then coinsurance follows until you reach your plan’s out-of-pocket maximum. That can be thousands of dollars before your health plan pays much. If treatment runs past the end of the plan year, the deductible starts over.

A critical illness plan can help carry that weight. CriticalGuard, underwritten and administered by Golden Rule Insurance Company, a UnitedHealthcare company, pays a lump sum when a covered person has a covered diagnosis. It pays regardless of other insurance coverage, and it pays you directly. The money can go toward the deductible, the coinsurance, and the costs that never show up on a medical bill.

To be clear about what it is: the brochure calls CriticalGuard a supplement to health insurance, not a substitute for it, and says it is not Minimum Essential Coverage under the Affordable Care Act. It pays for critical illnesses only. Benefits are a stated amount, regardless of the actual expense.

Here are two fictional examples from North Carolina, one at 66 and one at 39. North Carolina has its own version of the preexisting conditions rule, and in the first example it can change the outcome.

How the plan pays out

There are four plans: Cancer, Heart/Stroke, Cancer + Heart/Stroke, and the full-suite Critical Illness plan. You pick a Benefit Lifetime Maximum Amount in $5,000 steps. That’s the most the plan will pay in a lifetime for one category of Qualifying Events, and each category on your plan gets its own.

Each Qualifying Event pays a share of that maximum:

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

The plan pays on a First Diagnosis: the first time in the covered person’s lifetime, after the waiting period, while coverage is in effect. Every plan has a 30-day waiting period after the effective date. Benefits are per covered person.

What’s different in North Carolina

The North Carolina entry in the brochure has several changes. These are the ones that matter most for the examples below:

• Preexisting conditions don’t apply at 65 and over. They don’t apply to a covered person who is 65 or older on the policy effective date, unless specifically excluded by a rider.
• A narrower definition for everyone else. A Preexisting Condition is a sickness, injury or condition you had medical advice, care or treatment for in the 12 months before your effective date. It is also one for which a diagnostic procedure or screening was recommended or received in those 12 months, if it leads to care after the effective date. The general brochure has a third part, about symptoms that would have made a prudent person seek care. North Carolina’s definition leaves it out.
• Rate stability. Your rate won’t change during the first 12 months after the policy effective date for the people first covered, and not more than once in any 12 months after that. You get at least 45 days’ notice of a change.
• Eligible child is wider. It includes a foster child, as defined in the policy, and a child you or your spouse are required by a court or administrative order to cover.

The general limit still holds: the preexisting conditions limitation lasts no longer than 12 months after a covered person’s effective date. Where the North Carolina entry says nothing, the general brochure rule applies.

Harold in Morganton, 66

Harold is 66 and still works full-time as a maintenance supervisor at a furniture plant in Morganton. His health plan through work covers only him. It has a $6,000 deductible and an out-of-pocket maximum of $8,000. His wife, Joan, has her own coverage through her job.

In the year before he applied, Harold’s doctor started him on medicine for high blood pressure and told him his cholesterol was too high. It made him wonder what a heart attack would cost him.

What he chose. Harold bought a Heart/Stroke plan at 66. At issue ages 65 to 74, the range is $5,000 to $75,000, and $5,000 is guaranteed issue, which means no underwriting. He chose $20,000, so his application asked medical questions. He answered them fully, including the blood pressure medicine. His policy was issued with no rider excluding any condition. The brochure warns that incorrect or incomplete answers can void coverage or lead to denied claims.

Why the North Carolina rule mattered. Under the general brochure, the blood pressure treatment in the 12 months before his effective date would count as a Preexisting Condition. For his first 12 months on the plan, a heart attack caused or contributed to by it might not have been paid.

In North Carolina, Preexisting Conditions don’t apply to a covered person who is 65 or older on the policy effective date, unless a rider specifically excludes them. Harold was 66 on his effective date, and his policy had no such rider.

What happened. Seven months after his plan took effect, Harold was mowing on a hot Saturday when he felt a crushing pressure in his chest and broke into a sweat. Joan drove him to the emergency room. Doctors confirmed a heart attack and placed a stent the same day.

Seven months is well past the 30-day waiting period, which still applies in North Carolina at any age. It was within his first 12 months, which is when the age rule made the difference.

Joan printed the claim form from the UHC Member Hub. The brochure asks for notice of a claim within 30 days after the First Diagnosis, or as soon as reasonably possible.

The arithmetic.

• Harold’s Heart/Stroke Benefit Lifetime Maximum Amount: $20,000
• Share for a heart attack: 100%
• $20,000 × 100% = $20,000

The plan paid $20,000 in one lump sum, directly to Harold.

Where the money went.

• $8,000 for his share of the medical bills: the $6,000 deductible, then $2,000 of coinsurance to reach his out-of-pocket maximum
• $4,800 to replace pay for four unpaid weeks after his sick leave ran out, at about $1,200 a week
• $1,200 for gas, parking and meals during the hospital stay and cardiac rehab
• $6,000 set aside for next plan year’s deductible, because his rehab and follow-up visits run past January

That adds up to $20,000.

His Heart/Stroke plan also includes the Optum Heart Failure and Coronary Artery Disease Management Program and the Optum Perks prescription discount card, at no added cost. The brochure says these programs are not insurance and may require a diagnosis to qualify. Harold signed up for the heart program after his cardiologist diagnosed coronary artery disease.

What it didn’t do. Harold’s Heart/Stroke category is now paid in full. If he has a stroke or another heart attack, this plan won’t pay another benefit. And a Heart/Stroke plan doesn’t cover cancer at all.

Had Harold chosen the $5,000 guaranteed issue amount, the heart attack would have paid $5,000 × 100% = $5,000, which is less than his $8,000 out-of-pocket maximum. And if his policy had come with a rider excluding his blood pressure condition, the rider would have controlled. The North Carolina rule makes an exception for that.

Unlike in some states, the activity exclusions still apply in North Carolina: on this plan, a Qualifying Event connected to activities such as skydiving, motor racing or rodeo sports is excluded.

Priya and Arjun in Winston-Salem

Priya is 39 and manages the office of a veterinary practice in Winston-Salem. Her husband, Arjun, is 41 and teaches high school chemistry. Their son, Owen, is 12.

Their family health plan through Arjun’s job has a $5,000 deductible per person, up to $10,000 for the family, and an out-of-pocket maximum of $8,000 per person.

What they chose. Priya applied as the primary insured when she was 37, with Arjun and Owen on the policy. Arjun’s mother has Advanced Alzheimer’s Disease, and watching that made them want more than cancer and heart coverage. They chose the full-suite Critical Illness plan. At issue ages 18 to 49, its range is $5,000 to $100,000, and $5,000 or $10,000 is guaranteed issue. They chose $30,000 and answered the medical questions.

That gave each of the three of them a $30,000 maximum in each of three categories: Cancer, Heart/Stroke and Critical Conditions.

They added the Wellness rider. It pays $75 per exam for a covered wellness exam or procedure, such as an annual physical, an immunization, a colonoscopy or a mammogram. It pays one exam per calendar year, per person, and it has the same 30-day waiting period as the plan. All three of them had a physical each year, so the rider paid $75 × 3 = $225 a year. Rider benefits don’t count against the Benefit Lifetime Maximum Amount.

Their rate stayed the same for the first 12 months, as the North Carolina entry provides.

What happened. In May, about 26 months after the plan took effect, Priya found a swollen lymph node in her neck that didn’t go down. She’d been waking up soaked in sweat. A biopsy showed Hodgkin lymphoma.

Her diagnosis came long after the preexisting conditions limitation had ended. She also had no medical advice, care or treatment for it in the 12 months before her effective date.

The arithmetic. Priya’s diagnosis was reviewed under the policy’s definition of life-threatening cancer:

• Priya’s Cancer Benefit Lifetime Maximum Amount: $30,000
• Share for life-threatening cancer: 100%
• $30,000 × 100% = $30,000

Where the deductible came in. Priya’s diagnosis came in May, so the biopsy, the scans and the first months of chemotherapy all fell in the same plan year. By July she had paid her full deductible and her share of coinsurance:

• Her deductible: $5,000
• Her coinsurance after the deductible, up to the limit: $3,000
• $5,000 + $3,000 = $8,000, her out-of-pocket maximum

Where the money went.

• $8,000 for her out-of-pocket maximum
• $5,000 to replace pay. She worked half days for 10 weeks, about $500 a week less.
• $1,200 for after-school care and rides for Owen
• $1,100 for gas, parking and meals on treatment days
• $5,000 set aside for next plan year’s deductible, for follow-up scans
• $9,700 into savings

That adds up to $30,000. Priya also called the Optum Cancer Resource Service, which comes with the full-suite plan. An oncology nurse helped her understand her treatment options and find a second opinion.

What it didn’t do. Priya’s Cancer category is now paid in full. If her lymphoma comes back, or she’s diagnosed with a different cancer, this plan won’t pay another cancer benefit for her. The policy also excludes loss from any other disease, even one caused or complicated by a Qualifying Event or its treatment.

Her other two categories are untouched, at $30,000 each, and so are Arjun’s and Owen’s.

The Wellness rider pays for one exam per person per calendar year, not every visit. It didn’t pay for Priya’s biopsy, scans or treatment.

They have talked about fostering. In North Carolina, an eligible child includes a foster child, as defined in the policy. The brochure doesn’t say when a child can be added after the policy starts, so that’s a question to ask before counting on it.

Matching a benefit amount to your deductible and costs

Harold and Priya chose different amounts for different reasons. Here’s a way to think through your own.

Start with the worst plan year. Your out-of-pocket maximum is the most you’d pay for covered care in a plan year, under your health plan’s rules. Harold’s was $8,000.

Then consider the next plan year. Your deductible resets. Harold’s rehab ran past January, so he set aside a second deductible. Priya did the same for her follow-up scans. Treatment for a serious illness often runs for months.

Add what your health plan never pays. Unpaid time off, travel to treatment, care for a child, a spouse’s lost hours.

Check what each event pays at your amount. At a $20,000 maximum:

• Heart attack, stroke or life-threatening cancer: $20,000 × 100% = $20,000
• Loss of independent living, on the full suite: $20,000 × 50% = $10,000
• Cancer in situ, benign brain tumor or heart illness: $20,000 × 25% = $5,000
• Skin cancer: $500

Know your age band before you shop. Your issue age sets your range. At 65 to 74, it’s $5,000 to $75,000 on every plan, and $5,000 is guaranteed issue. At 75 to 90, it’s $5,000 to $50,000. Buying earlier keeps a higher ceiling open.

At 65 or older in North Carolina, know the preexisting rule and read your policy. The limitation doesn’t apply at 65 and over on your effective date, unless a rider specifically excludes a condition. If your policy arrives with a rider, read it closely.

CriticalGuard is guaranteed renewable for life, as outlined in the policy, and premiums won’t change solely because of a claim or a change in your health. After your policy is issued, you have a free look of 10 days.

The short version

• A high deductible can cost thousands before your health plan pays much, and it starts over each plan year. A CriticalGuard lump sum is paid to you and can cover it.
• In North Carolina, Preexisting Conditions don’t apply to anyone 65 or older on the policy effective date, unless a rider specifically excludes one. The 30-day waiting period still applies.
• North Carolina’s rate can’t change in the first 12 months, and not more than once in any 12 months after that.
• Each category pays up to its maximum once in a lifetime, per person, and partial benefits pay less.
• It is a supplement, not health insurance, and not Minimum Essential Coverage.

This is a fictional illustration. The policy sets the full terms of coverage, and actual benefits, underwriting rules and availability depend on carrier guidelines and state regulations.