Medical Expense, Long-Term Care, and Other Health Insurance
Medical expense insurance
Basic hospital, surgical, and medical plans pay scheduled benefits. Major medical pays a broad range of expenses after a deductible and coinsurance, subject to a stop-loss limit. High-deductible health plans paired with health savings accounts let pre-tax dollars cover routine costs. Critical illness and cancer policies pay a lump sum on diagnosis rather than reimbursing treatment costs, so they function like indemnity contracts.
Long-term care insurance
LTC pays for custodial care: nursing home, assisted living, and home care. Benefit triggers are typically inability to perform 2 of 6 activities of daily living (bathing, dressing, eating, toileting, transferring, continence) for at least 90 days, or severe cognitive impairment. Key features include the elimination period, benefit amount and period, inflation protection, guaranteed renewability, and optional nonforfeiture. Tax-qualified policies receive favorable tax treatment, and premiums may be deductible within age-based limits. Medicare does not cover custodial care.
Medicare and supplements
Medicare Part A covers hospital stays, Part B covers outpatient care, Part C is Medicare Advantage, and Part D covers prescriptions. Medigap policies fill Part A and B cost-sharing gaps and are standardized by letter.
Other products
Accidental death and dismemberment pays a principal sum for accidental death and a capital sum for specified losses. Dental, vision, and limited-benefit plans fill narrow gaps.
Traps
LTC benefits require a licensed health care practitioner's plan of care. Medicare never pays for custodial care. Critical illness pays on diagnosis regardless of actual bills.
Rule of thumb
Two of six ADLs for at least 90 days, or cognitive impairment, triggers LTC benefits.