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Hospital Indemnity | How It Started

For over a century, getting hurt—and then having to go somewhere for health care—has always come with costs. Whether you got trampled by a horse in the 1800s or you tripped while texting and walking in the 2010s, going to a hospital has never been cheap.

Insurance has nearly always been there to help people pay for unexpected hospitalizations—taking different types and terms over the years. But sometimes there’s still leftover costs after your insurance helps pay. This is where certain supplemental policies can help you out.

The History of Hospital Coverage

Today’s idea of prepaid health insurance got its start in the late 1800s and early 1900s.

Back then, jobs in mining and logging were treacherous work. To protect the employees doing them, labor unions would contract with hospitals to help cover hospitalization costs.

That arrangement worked for everyone involved—workers got care, hospitals got patients and employers could attract laborers with worker’s compensation.

Hospital-Owned Insurance Plans

Hospitals started to create in-house prepaid insurance programs over the next decades.

Known as the pioneer for that model, Baylor University in Dallas, Texas, provided members up to three weeks of hospitalization each year for a $6 annual fee. People signed up in droves, growing the program from 1,500 schoolteachers to thousands of members. Shortly after, other hospitals launched their own plans.

Independent Insurance Companies

But when the Great Depression came, many facilities had to cut costs where they could, kind of like they’re doing today.

Hospitals outsourced their health insurance management to different organizations, creating what would become the modern-day insurance company. Doctors could focus on what they did best (providing quality care) while leaving the risks of insurance to someone else.

Insurance as a Bargaining Chip

As that new model took hold, insurance became a commodity—that is, a thing to buy, sell and attract good workers.

In the 1940s and on, labor groups started to consider it a fringe benefit—meaning it could be used for collective bargaining. That helped along negotiations between employees and employers to get workers more protection and better coverage.

The Modern-Day Need for More Help

The momentum of health insurance as an employment bargaining chip has continued. Legislation like the Affordable Care Act has mandated employer-sponsored health insurance with certain types of coverage for certain types of businesses.

And yet, health care costs keep going up for everyday people. A lot.

As those costs exceed what people can actually afford, it has paved the way for voluntary benefits like Hospital Indemnity on an even greater scale.

Increasing Costs of Health Care

To see how high costs have gone up, take a one-night hospital stay. In 2000, that stay averaged about $1,181. But by 2018, that number jumped to $2,653.

Despite having health insurance through their jobs, many people have trouble affording health care because of what’s called cost-sharing.

Cost-Sharing Explained

Cost-sharing in health insurance plans requires you to pay:

• a deductible
• coinsurance
• copays up to a designated out-of-pocket amount.

For many plans, you have to meet your deductible first before insurance pays its partial share. You then pay coinsurance and/or copays up to your out-of-pocket amount before insurance pays 100% of in-network care.

Those cost-sharing amounts have gone up too, faster even than the 1-3% inflation averages. Take deductibles, for example:

Enter Voluntary Plans Like Hospital Indemnity

These trends of rising health care costs have landed people in dire financial straits. About 1 in 3 Americans have medical debt, and many owe more than $10,000. Many people can’t afford an unexpected $400 bill.

That’s where add-on insurance plans enter the story. These supplemental plans pay lump-sum payments for covered events. These benefits can help bridge the coverage gaps of regular insurance. And hospital indemnity does just that. It’s a supplemental insurance that’s become increasingly more popular in recent years. It helps pay benefits for certain types of hospital care.

What’s Ahead for Hospital Indemnity

The path to get here may have been long and winding, but one thing’s for sure: Hospital Indemnity insurance will likely become an even more fixed part of the health care picture moving forward.

COVID-19 may have helped pick up the pace, but things had been heading in that direction long before the pandemic due to the rising costs of health care. Hospital Indemnity insurance is also affordable and offers family coverage that helps out parents with injured or sick kids.

The workforce has changed, too. As younger workers enter the workplace with different priorities than their parents, the value of a job goes far beyond the paycheck alone. These days, about 30% of an employee’s total compensation comes from non-wage benefits, like health insurance or paid time off.

With all these trends at play, it’s clear that benefits and flexibility make up the new center of gravity for modern-day employment. Just as they did a century ago, voluntary benefits like Hospital Indemnity insurance can separate the good jobs from the so-so ones, the right opportunities from those worth passing up.

As you work through what’s important to you in your job, take time to learn more about these valuable benefits and how they can help you safeguard your budget against the unexpected.

Which Supplemental insurance plan is right for you and your family? Learn more about coverage for:

This informational material shall not be considered financial advice. The Hartford assumes no responsibility for any financial, investment, or tax-related decisions. Those seeking resolution of specific financial, legal, tax, or business issues, questions, or concerns regarding this topic should consult their own financial, investment, tax, legal, or other business consultants, advisors, or other professionals.