Capped Benefits: Know the Pitfalls and Dangers!

Posted on Tuesday, April 19th, 2016 at 12:20 pm

With most insurance plans, there will always be marketing materials such as brochures or a table of benefits that explains the benefits of that particular plan. While this may give you a bird’s eye view of your plan, this is NOT the official policy wording of your policy and you might be surprised to find out that the benefits you thought you had are in fact capped at a lower benefit amount! But why?

In this blog we are going to explore the concept of capped benefits, what they are, and how to spot them so you know what your insurance plan does – and doesn’t – cover.

What Are Capped Benefits?

Health insurance plans may have limitations on benefits, regardless of the overall coverage on your policy. These limits, also known as capped benefits, reduce your coverage by either:

1. Putting a maximum dollar amount on a certain benefit (i.e., hospitalization is covered up to $600/day)
2. Putting a maximum number of days a benefit is covered (i.e., medicine is covered for 30 days)

In both examples, you could have an insurance plan that covers you up to $500,000, but you would be stuck with a large bill since your policy would stop paying after a certain dollar amount or after a certain period of time.

Example 1. Let’s explore the first scenario where hospitalization is covered up to $600 per day. Hospitalization in the US can cost thousands of dollars every day that you are in the hospital, so if you have an insurance plan that covers only $600 each day, you’d have to pay the remainder of your bill out of pocket.

Example 2. Now, let’s explore the second scenario where you have a condition that requires you to take medication daily. In this scenario, your insurance plan would cover your medication for the first 30 days, but after you would have to pay the full cost of your prescriptions. This may break the bank as some prescriptions can cost hundreds or even thousands of dollars.

In either example, however, it’s important to know how your plan works so that you can budget appropriately! Many international students look for the most affordable plan, but these plans can have these capped benefits. If you need to use the plan, you may find that it wasn’t very economical after all -especially after paying for both the insurance and the portion of the medical bills not covered. Typically, if you pay a little more, you can find a plan without these caps.

But how do you know if your plan has capped benefits?

How To Spot Capped Benefits

As you can imagine, capped benefits can increase the amount you pay out of pocket, and with some insurance plans these limits are hidden! Oftentimes insurance companies provide a summary of benefits in an easy-to-read table that details what is covered on your plan, and they might have a great brochure that summarizes coverage. It’s important that you know that this is NOT the policy wording, and that there may be key pieces of information that isn’t explained in the table or marketing material.

While many insurance companies include this information in their materials so that the consumer knows what they are buying – not all companies do this! To prevent any unwanted surprises, along with large medical bills, it’s important that BEFORE you purchase the plan you ask the insurance company for your policy wording. There are many ways to refer to this document but the most common are:

• Master Policy
• Description of Coverage
• Certificate of Coverage
• Policy Wording

While this document may seem lengthy and a bit daunting (yes, it really does look and read like a contract!), it’s important to read through the benefit descriptions to make sure you understand how the benefits are applied. After all, this is the document that the insurance company uses to process your claims.

To learn more about other out of pocket expenses that may come up on your insurance plan, read our Understanding Out of Pocket Expenses article.

Posted by Jennifer Frankel

Jennifer is the International Director at International Student Insurance. Jennifer is a graduate of the University of Florida where she holds a Masters in International Business and a Bachelors of Science in Business Administration. She has lived and worked abroad in Mexico, Chile, Costa Rica and England, and traveled extensively in South America, Europe and Asia.