Covering a high deductible in Texas with critical illness insurance: two examples

A health plan with a high deductible keeps the monthly premium down. In a quiet year you barely notice it. In a hard year you notice it all at once: you can owe thousands of dollars before your health plan pays much, and the deductible starts over every plan year.

A critical illness plan is one way to plan for that gap. 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 what any other insurance pays, and the money goes to you, not to a hospital. You can put it toward the deductible, the coinsurance after it, and the costs a medical bill never shows, like lost pay, gas and help at home.

It is not health insurance. The brochure says CriticalGuard is a supplement to health insurance and not a substitute for it, and that it is not Minimum Essential Coverage under the Affordable Care Act. It pays for critical illnesses only, in a stated amount, regardless of the actual expense.

Here are two fictional examples from Texas, worked out from the brochure. The people are invented. The plan rules are not, and Texas has a few of its own.

How the plan is put together

CriticalGuard comes in four plans. Each one pays a set share of the amount you choose when a covered person has a First Diagnosis of a Qualifying Event:

• Cancer: life-threatening cancer pays 100%; cancer in situ and benign brain tumor pay 25%; skin cancer pays a flat $500.
• Heart/Stroke: heart attack and stroke pay 100%; heart illness pays 25%.
• Cancer + Heart/Stroke: both lists, each with its own maximum.
• Critical Illness, the full suite: both lists, plus a Critical Conditions category. Advanced Alzheimer’s Disease, ALS, a coma lasting at least 7 consecutive days, end stage renal failure and major organ transplant each pay 100%, and loss of independent living pays 50%.

The amount you choose is the Benefit Lifetime Maximum Amount: the most the plan pays in a lifetime for one category. You choose it in $5,000 steps, within a range set by your age when the plan is issued. Benefits are per covered person. When a payment is less than 100%, the rest of that category stays available for a later Qualifying Event, but the total never goes above the maximum.

First Diagnosis means the first time in the covered person’s lifetime, after the waiting period, while the coverage is in effect. Every plan has a 30-day waiting period after the effective date, and every plan has a preexisting conditions limitation.

What’s different in Texas

Each state has its own policy forms, and the brochure lists what changes in each one. For Texas, these are the changes that come up most:

• Eligible child is wider. It includes a child you or your spouse are party to a suit to adopt. It also includes your or your spouse’s grandchild who is unmarried, under 26, and your or your spouse’s dependent for federal income tax purposes at the time of application.
• Two Optum programs are not available through the policy: Optum Cancer Resource Services and the Optum Heart Failure Disease Management Program.
• Several exclusions don’t apply. Among them: a diagnosis made outside the United States, and the exclusions for listed activities such as professional sports, skydiving, motor racing and rodeo sports.
• The preexisting limit is shorter at 65 and over. For someone 65 or older on their effective date, the preexisting conditions limitation lasts no longer than 6 months, instead of 12.

Where the Texas entry says nothing, the general brochure rule applies.

Curtis, Darlene and their grandson in Amarillo

Curtis is 61 and drives a school bus in Amarillo. Darlene is 59 and works in payroll for the school district. Their grandson, Tyler, has lived with them since he was 8. They never went to court for guardianship. They simply raised him, and they claim him as their dependent on their federal tax return.

Darlene’s health plan through work covers all three of them. Each person has a $6,000 deductible, and the most any one person can owe in a plan year is $8,500. She knew one bad year could cost that much for one person alone.

What they chose. When they applied, Curtis was 59, Darlene was 57 and Tyler was 14. Under the general brochure, an eligible child is your or your spouse’s child under 26, including an adopted child or one for whom legal guardianship has been awarded. Tyler wasn’t any of those. What made him eligible was the Texas rule: a grandchild who is unmarried, under 26 and their tax dependent at the time of application.

They chose the full-suite Critical Illness plan, with Curtis as the primary insured. At issue ages 50 to 64, its range is $5,000 to $100,000, and $5,000 or $10,000 is guaranteed issue, which means no underwriting. They chose $40,000, so the application asked some medical questions. They answered them carefully. The brochure is clear that incorrect or incomplete answers can void coverage or lead to denied claims.

That gave each of the three of them a $40,000 maximum in each of three categories: Cancer, Heart/Stroke and Critical Conditions. They didn’t add a rider. Riders cost extra and can only be added when you apply.

What happened. Two years after the plan took effect, Darlene’s screening mammogram showed a small cluster of calcium spots. A biopsy followed. The diagnosis was ductal carcinoma in situ, an early breast cancer that hadn’t spread beyond the milk duct. She had a lumpectomy, then several weeks of radiation.

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

The arithmetic. Her diagnosis was reviewed under the policy’s definition of cancer in situ, which pays 25%:

• Darlene’s Cancer Benefit Lifetime Maximum Amount: $40,000
• Share for cancer in situ: 25%
• $40,000 × 25% = $10,000 paid
• $40,000 − $10,000 = $30,000 still available in Darlene’s Cancer category

The brochure limits the cancer in situ benefit to one per person, per lifetime. If a later diagnosis qualified as life-threatening cancer, the plan could pay up to the $30,000 left in her Cancer category, according to the policy’s terms. It would not pay a fresh $40,000.

Where the money went. Her surgery, radiation and follow-up visits brought her to her health plan’s limit for the year:

• Her deductible: $6,000
• Her coinsurance after the deductible, up to the limit: $2,500
• $6,000 + $2,500 = $8,500, her out-of-pocket maximum

The $10,000 covered that, with $1,500 left. About $1,100 of it replaced Darlene’s unpaid days off during radiation. The other $400 went to gas and meals on treatment days. $8,500 + $1,100 + $400 = $10,000.

What it didn’t do. The 25% share kept this benefit much smaller than a 100% event would pay. A life-threatening cancer would have paid 100%, or $40,000. And if they had chosen $20,000 instead, cancer in situ would have paid $20,000 × 25% = $5,000, which is less than Darlene’s $8,500.

Her follow-up mammograms continue, and her deductible starts over each plan year. The plan won’t pay again for the same diagnosis. The Optum Cancer Resource Service, which the brochure lists with cancer coverage elsewhere, isn’t available through the policy in Texas. And the plan never paid a provider. Darlene’s health plan paid the surgeon and the radiation center under its own rules.

Darlene’s other two categories, Heart/Stroke and Critical Conditions, are untouched at $40,000 each. So are all three of Curtis’s, and all three of Tyler’s. Tyler is 16 now. If he has a covered diagnosis while he’s on the policy, he has his own maximums, because the Texas rule made him an eligible child.

Wade in Abilene

Wade is 54 and an HVAC technician in Abilene. He is divorced and covers only himself. His health plan through work has a $5,000 deductible and an out-of-pocket maximum of $7,000. Most weekends from spring to fall, he ropes at small arenas around Taylor County.

What he chose. At 52, Wade bought a Cancer + Heart/Stroke plan. At issue ages 50 to 64, its range is $10,000 to $100,000, and $10,000 is guaranteed issue. He chose $35,000, which gave him two separate maximums of $35,000: one for Cancer and one for Heart/Stroke. His application asked medical questions.

He added the Telemedicine rider. It gives $0 general physician consultations, with unlimited visits, by app, web or phone, 24 hours a day. Behavioral health and dermatology consultations carry an extra charge. Unlike the plan itself, the Telemedicine rider is not subject to the waiting period.

The roping question. In the general brochure, the Heart/Stroke, Cancer + Heart/Stroke and Critical Illness plans exclude Qualifying Events connected to certain activities, and rodeo sports are on the list. The Texas entry lists that exclusion among the ones that don’t apply. That mattered more than Wade expected.

What happened. Twenty-two months after his plan took effect, Wade was saddling for his second run on a Saturday morning. His right arm went weak, and when he tried to tell his roping partner, the words came out wrong. His partner called 911. At the hospital in Abilene, doctors confirmed a stroke.

Because it happened at a roping, the activity exclusion is the first thing a careful reader would ask about. Under a Texas policy, it doesn’t apply.

The arithmetic.

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

The plan paid $35,000 in one lump sum, directly to Wade. His Cancer category is untouched at $35,000.

Where the money went.

• $7,000 for his share of the year’s medical costs: the $5,000 deductible plus $2,000 of coinsurance, which brought him to his out-of-pocket maximum.
• $6,600 to replace pay. He had two weeks of sick leave, then six unpaid weeks at about $1,100 a week.
• $1,200 to a neighbor’s son to feed and water his two horses for three months.
• $800 for a shower seat and grab bars.
• $900 for gas to outpatient therapy, three times a week.
• $5,000 set aside for next plan year’s deductible, because his therapy and follow-up visits run past January.
• $13,500 kept in savings.

That adds up to $35,000. The Telemedicine rider earned its keep in a quieter way. Wade used it on evenings when a general question came up about his new prescriptions and his doctor’s office was closed.

What it didn’t do. Wade’s Heart/Stroke category is now paid in full. If he has another stroke or a heart attack later, this plan won’t pay another Heart/Stroke benefit. The Optum Heart Failure Disease Management Program isn’t available through the policy in Texas. And the plan doesn’t send a monthly check while you’re off work. It paid once.

Some exclusions still apply in Texas. Among them: a diagnosis made by you or a member of your immediate family or household, intentionally self-inflicted harm, a felony, incarceration, and any diagnosis before the effective date or during the waiting period.

Matching a benefit amount to your deductible and costs

Here is a way to work out your own number.

1. Start with your health plan’s numbers. Find your deductible and your out-of-pocket maximum, for each person and for the family. Those two numbers are the place to start: your out-of-pocket maximum is the most you’d pay for covered care in one plan year, under your health plan’s rules.

2. Plan for the reset. A deductible starts over each plan year. A diagnosis late in the year, or treatment that runs into the next one, can mean two years of out-of-pocket costs. Wade set aside $5,000 for exactly that.

3. Add what isn’t on a medical bill. Unpaid time off, a spouse’s missed work, gas, meals, help with animals or children, changes to the house. For Darlene, these smaller costs came to $1,500.

4. Check the percentage, not just the maximum. A heart attack, a stroke or a life-threatening cancer pays 100%. Cancer in situ, a benign brain tumor or heart illness pays 25%. On the full suite, loss of independent living pays 50%. Skin cancer pays $500 whatever you choose. Here is how a few maximums work out:

• $20,000: 100% pays $20,000; 50% pays $10,000; 25% pays $5,000
• $35,000: 100% pays $35,000; 50% pays $17,500; 25% pays $8,750
• $40,000: 100% pays $40,000; 50% pays $20,000; 25% pays $10,000

If a 25% event at your amount wouldn’t reach your out-of-pocket maximum, you know where the gap is.

5. Know your age band. The range you can choose depends on your issue age. Guaranteed issue amounts are smaller: $5,000 or $10,000 at some ages and on some plans, and $5,000 at issue ages 65 to 74. Anything above them means medical questions.

6. Remember it’s per person. Each covered person has their own maximum for each category. One person’s claim doesn’t use up anyone else’s.

A few policy terms are good to know too. CriticalGuard is available for issue ages 18 through 90 and is guaranteed renewable for life, as outlined in the policy. Premium rates can change, but not solely because of a claim or a change in your health. The Texas entry doesn’t change the general rule of at least 31 days’ notice of a premium change. After your policy is issued, you have a free look of 10 days.

The short version

• A high deductible can mean thousands of dollars before your health plan pays much. A CriticalGuard lump sum can go toward it, and toward everything else.
• In Texas, a grandchild who is your tax dependent at the time of application can be an eligible child, and the rodeo sports exclusion doesn’t apply.
• A 25% benefit is much smaller than a 100% benefit. Choose an amount with both in mind.
• Each category pays up to its maximum once in a lifetime, per person.
• 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.