Long-Term Effects of Lifetime Maximum on Health Insurance
Health insurance coverage has some loopholes to prevent companies from paying far more than they expected for a policyholder. One of these is an annual maximum, normally not found on many policies today. Another is specific coverage. This type of coverage only applies if you have a certain disease, like cancer. A third method used by insurance companies to guarantee their financial life is a lifetime maximum payment per insured. Once the insured receives payments that amount to the ceiling set by the insurance company, payment ceases.
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Catastrophic Condition
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If you have a major illness that requires a long hospital stay, particularly intensive care, your bill could soar to hundreds of thousands of dollars. Companies have a ceiling, often $1 million, where they cease paying the bills. Watch out for companies that only allow $250,000 maximums. A major stay in the hospital with surgery and a intensive care services may eat up maximum coverage in a few months.
New Company, New Maximum
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An individual who carries her own personal health insurance has a difficult time changing carriers if she has an expensive pre-existing condition. Most of the time, she must stay with her insurance company. The same is not true of group health insurance. If your coverage from an employer hits the maximum and the employer changes carriers or you change employers, you start accumulating the maximum coverage again. The previous payments by another carrier don't count.
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Reinstatement of Maximums
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Some companies know that one disease can wipe out a lifetime of coverage. To offset the problem for the insured, they offer a phase-back opportunity for policies. Each year the insurance company adds coverage back, for example $50,000, to the lifetime maximum benefit. Every policy is different, so check the fine print.
Inflation
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Companies increase the lifetime maximum coverage as health care costs inflate. When they do so, they must increase everyone's coverage, including those close to the maximum. People close to reaching maximums several years ago may still have a distance to go as the ceiling raises on payments.
Catastrophic Coverage
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If you have no control over the maximum coverage, as in a group health plan, you might consider catastrophic coverage. This supplement pays once the bills reach a specific high amount. You might need the additional coverage. Be aware; it may not cover all types of illness. If you buy personal insurance, it's better to buy a policy with a high lifetime maximum and far cheaper premiums.
Disastrous Effects
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Bills in excess of a lifetime maximum are just as devastating as medical bills if you have no insurance. In both cases, you're responsible for the payment. Check the maximum benefits carefully when you purchase a policy. If you have a choice, pay a slightly higher premium and you'll often get almost double the lifetime benefit.
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