Selling Hospital Indemnity with Medicare Advantage: Is It Worth It?

Now, more than ever before, Medicare Advantage plans are leaving beneficiaries exposed to hefty bills for hospital stays. Hospital indemnity insurance helps your clients have the money they need to get back on their feet!

A type of ancillary product, hospital indemnity insurance can pay for expenses related to inpatient stays. Here’s why you should carve out a spot for these plans in your portfolio this fall.

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The Ideal Cross-Sale

Many Medicare eligibles are attracted to Medicare Advantage (MA) plans because of their extra benefits and low, or nonexistent, premiums. While appealing for those reasons, $0-premium MA plans have high copays and high deductibles. They can also have annual out-of-pocket limits as high as $8,850 ($9,350 in 2025). A tab like that can spell big trouble for seniors who require medical attention.

For the U.S., the average length of a hospital stay is about 4.5 days, and the average cost of an inpatient stay with an MA plan as the primary expected payer is $14,900. Even with health insurance, it can be tough for clients to afford their payments, especially if they’re living on a fixed income or miss work due to their illness or injury.

Even with health insurance, it can be tough for clients to afford hospital payments.

What Is Hospital Indemnity Insurance?

Hospital indemnity plans provide a fixed amount of money directly to the beneficiary upon a qualifying event. This predetermined benefit can pay for deductibles, ER visits, observation stays, surgeries, medications, transportation, lodging, health screenings, and more. Additionally, individuals can add riders to these policies to help pay for cancer, ambulance, or skilled nursing related costs!

If you’re a Medicare sales agent, offering this product is a great way to go that extra mile for clients. It’s truly possible to earn more money selling hospital indemnity insurance. And, one of the greatest things about these plans is that you can sell them year-round!

A Huge Market Opportunity

Let’s take a look at some statistics. According to KFF:

• 51% of Medicare beneficiaries are in MA plans.
• 97% of MA enrolles are in plans that offer prescription drug coverage.
• 73% of MAPD beneficiaries don’t pay a premium for their plan.
• MA plan enrollees have a weighted average out-of-pocket limit of $4,835 for in-network services and a weight average out-of-pocket limit of $8,659 for out-of-network services (PPOs).

Right now, there are a lot of beneficiaries out there who could benefit from hospital indemnity plans. With the Congressional Budget Office projecting that MA enrollment will grow to 62 percent by 2033, you should expect to keep meeting people who make excellent prospects for this product.

Right now, there are a lot of beneficiaries who could benefit from hospital indemnity plans.

Is Hospital Indemnity Insurance Worth It for My Client?

People of any age can enroll in this form of coverage, but it’s not a good fit for everyone.

The ideal client for hospital indemnity insurance is someone who’s already in your book of business. Specifically, consider enrollees who have $0-premium MA plans. Also look at clients who are on fixed budgets and can’t afford high out-of-pocket costs.

Before making any suggestions to your client, do your research. Compare the benefits of your client’s primary health insurance plan and hospital indemnity plans, and see if he or she stands to gain more in protection than they have to lose in monthly premiums.

Are There Any Rules on Selling Hospital Indemnity Plans?

Please note that you cannot sell these plans at a Medicare sales appointment UNLESS your client has checked off the hospital indemnity related box on their Scope of Appointment (SOA) form. Also keep in mind, CMS has reinstated the 48-rule for SOAs.

So, is hospital indemnity insurance worth selling with Medicare Advantage plans? We believe the answer is a resounding YES. Like blankets and sweaters, certain MA plans and hospital indemnity plans work better together. Having more complete coverage will help keep your clients feeling all warm, fuzzy, and protected even on the coldest days ahead.

Editor’s Note: This was originally published in October 2017. It has been updated to include information more relevant to the 2024 AEP.