Most people don’t consider the risks involved in seemingly safe exercises and physical activities. However, unless your hobbies include extreme sports such as base jumping or motorcycle racing, every time you get on a bike, you’re taking on a disproportionately larger amount of risk than you would otherwise on that particular day. It’s likely that you’ve never stopped for even a second to think about the possibility or the consequences of things going wrong. It is natural for us to overlook the risks associated with activities that we enjoy; as emotional beings, we tend to rely more on feelings than facts when the stakes get high. If the odds of something terrible happening in the near future aren’t particularly high, we have trouble connecting emotionally.
As a cyclist, you are a lot more likely to end up in the emergency room than someone who spends their free time playing board games. When that happens, the only thing that’s worse than wondering how well you are covered is knowing for sure that you are not. If you have limited coverage or no coverage at all, a hospital stay may have lasting effects on your life, even after you’ve recovered. A treatment for one of the most common cycling injuries, clavicle fracture, or broken collarbone, costs upwards of $17,000. An average day spent in a hospital can run about $10,000 and an average cost to treat a concussion is around $18,500. Just because you have health insurance does not mean you’ll just walk out of the hospital free and clear of financial obligations.
Thanks to healthcare industry loopholes, it’s still possible to get stuck with surprise medical bills for thousands of dollars, even when you thought you’re following the rules! Whether your health insurance is provided by your employer or you purchase individual coverage, there are some subtleties you need to understand about how your health insurance policy works. You might even discover that there are gaps in coverage that need to be addressed in order to protect you from the risks associated with your cycling lifestyle.
Health insurance terms
Insurance policies are contracts, written by attorneys and designed to remove any possible ambiguity from coverages and limits. While they do not read like the “legaleze” corporate contracts, they are long and boring because they have to cover (or exclude) a large number of scenarios and circumstances. Since the introduction of the Affordable Care Act of 2019, commonly known as Obamacare, the health industry has been undergoing a metamorphosis, trying to react to the changing market conditions while remaining commercially viable. Unfortunately, this translates to highly fluctuating prices, coverages and general availability: the fact that your insurance plan didn’t change in price from last year does not mean that the coverages remained the same. It is prudent that you read the policy every year - especially if you’re switching providers. To help you navigate the language of the policy better, below is a list of the most critical terms with an explanation of how they may affect you.
Premium: Your premium is a monthly payment that is paid to the insurance company. This cost is usually subsidized by your employer, where the employer pays the majority of the cost and deducts the rest from your paycheck.
Benefit and Benefit Level: A medical service that the policy covers, for example a visit to a primary physician or a blood test. The benefit level is the condition of that coverage, which could be a portion of the cost, or the maximum dollar amount, or the number of times the policy would pay for the benefit per year. For example, your policy may cover two routine blood tests per year at a limit of $500 per test. If for some reason your doctor requests a complex blood panel that costs $3,000, you might end up with a $2,500 bill.
Copay: Your copay is a pre-agreed rate you pay for health care services. For example, you may have to pay $25 to visit a primary care physician, $45 to visit a specialist, $10 for a monthly medication and $500 for an emergency room visit.
Deductible: A deductible is how much you pay to medical services providers before your health insurance company starts paying the larger portion of the costs. Deductibles are applied yearly to each person on the policy and per family, such as $2,500 deductible per year per person and $5,000 yearly per family. If you have a $10,000 hospital bill (broken bone without being admitted) with 20% coinsurance your share will be $2,000 and with a $2,500 per person annual deductible your responsibility is the full $2,000. Yearly deductibles are also known as an annual out-of-pocket expense and will be listed in the front pages of your health insurance policy.
Coinsurance: Coinsurance is a percentage of the cost that you pay for a health care service, with the rest paid by your health insurance company. Normally, a deductible has to be met before coinsurance applies. Not all insurance plans have coinsurance, many cover all the costs once all deductibles are met. Insurance plans with coinsurance are usually cheaper than those without, since with coinsurance there’s a greater share of the risk placed on the insured (you). These plans make sense for healthy and financially conservative individuals. The most common plans on the market have coinsurance ratios of 20/80 and 50/50. If you have a 20% coinsurance, you pay 20% of each medical bill with the insurance company covering the remaining 80%. As you can imagine, if you have a 50/50 coinsurance plan and suffer a catastrophic health experience, it is very likely to turn into a catastrophic financial experience as well.
Out-of-Pocket Maximum (Limit): The out-of-pocket maximum is the sum of the deductibles, coinsurance and copays you must pay before the insurance will start covering 100% of the bills for the remainder of the year. The premium payments do not count towards this limit so you must continue paying them even if you reached the out-of-pocket maximum. In 2020, plans sold on the Health Insurance Marketplace are capped at an out-of-pocket limit of $8,150 for an individual or $16,300 for a family.
In-network Provider: An in-network provider is a medical services provider that is contracted to work with your insurance carrier. These providers have pre-negotiated rates for all the services so your bills will be significantly lower and the costs will count towards your out-of-pocket maximum.
Out-of-Network Provider: An out-of-network provider is a medical services provider with which your insurance carrier hasn’t established pre-negotiated rates with. Benefits and benefit levels for out-of-network providers are usually categorized separately by your policy, with some policies going as far as outright refusing to pay for services rendered by out-of-network providers.
Words of Advice: Every hospital will accept your health insurance, but the subtle difference between accepting your insurance and being a “contracted” in-network can lead to a costly visit. A hospital contracted with your health insurance company (in-network provider) has agreed to discounted rates for your visit, whereas a non-contracted hospital (out-of-network provider) will accept your health insurance, but will charge retail rates for the visit, leaving you responsible for the copay and coinsurance balance not paid by your health insurance company. Depending on your policy this might amount to the entire bill. It is imperative that you learn which hospitals are in your network ahead of time so that you don’t make a costly mistake under pressure.
Exclusions and Limitations: The Exclusions and Limitations section is one of the most important sections of the policy because it lists health conditions and insurance services that are either excluded or limited in coverage. It is very important to know what services are excluded or limited because not knowing could leave you with a hefty medical bill that you might not be able to afford.
Waiting Period: The waiting period, also known as the elimination and qualifying periods, is a federally mandated (maximum 90 day) period of time the insured must wait before some or all of their coverage comes into effect. The waiting period initiated by the employer gives the employer the time to know whether the new employee is sticking around before paying health insurance costs.
Types of health plans
Health Savings Accounts (HSA): A Health Savings Accounts isn’t a health plan on it’s own; it is a tax-advantaged savings account for those enrolled in a High Deductible Health Plan (HDHP). Funds deposited into this account accumulate year to year and may be used to pay for qualified medical expenses at any time, without penalty or tax liability. In 2020 you can contribute up to $3,550 for yourself or up to $7,100 for family coverage into an HSA.
Health Reimbursement Arrangement (HRA): A Health Reimbursement Arrangement, also known as a health reimbursement account, is an employer-funded, tax-advantaged benefit. HRAs are popular with small businesses that can’t afford group health coverage. Depending on which HRA plan is selected by the employer, the account balances may roll forward from year to year. Because an HRA can reimburse medical expenses as well as premiums, it's a very valuable benefit for employees in many insurance situations.
High Deductible Health Plan (HDHP): A High Deductible Health Plan is a type of a plan that combines a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA), and limited traditional medical coverage. HDHPs cover preventive care before a deductible, but do not pay for non-preventive services until a high annual deductible is met. HDHP is a great choice for healthy individuals that rarely visit a doctor but need catastrophic coverage.
Health Maintenance Organizations (HMOs): Health Maintenance Organizations provide all of the health services through their own network of healthcare providers. Since you must stay in-network, you will be limited in your choice of providers. You will also have to manage your care through a primary care doctor who will refer you to specialists when necessary. This is the most common type of health insurance offered through employment as they are considered cost-effective and provide adequate coverage for a broad range of customers.
Preferred Provider Organization (PPO): Preferred Provider Organizations do not require you to get a referral from a primary care doctor to see a specialist. They often have significantly broader networks than HMOs, provide reasonable coverage for out-of-network services, but also command higher out-of-pocket costs. When choosing between PPO or HMO, decide whether you value access to a wider range of health care providers over monthly savings. If you travel, PPO is most likely a better choice for you since you might need care from an out-of-network provider, even if it means paying more for the convenience.
Exclusive Provider Organization (EPO): Exclusive Provider Organization plans cost less than HMO and PPO plans and provide more wallet-friendly rates. Just like with PPO you do not have to get a referral to see a specialist, but you can only visit in-network providers. These plans fit individuals who don’t foresee frequent doctor visits.
Hospital Indemnity Insurance/Hospitalization Insurance: A Hospital Indemnity Insurance/Hospitalization Insurance type of policy is gaining popularity as a result of the rapidly increasing deductibles, coinsurance and high out of pocket expenses under the Affordable Care Act. Hospital Indemnity Insurance will pay you directly if you have to spend time at a hospital. Most plans pay based on a fixed benefit, which means if you’re admitted to a hospital with an injury, the plan may pay $250 for the emergency room visit, $1,000 for the hospital admittance, and $6,000 for being in the hospital for 2 days. If a Hospital Indemnity Insurance is your only insurance policy, you might be stuck with the remainder of the hospital bill. If Hospital Indemnity Insurance is supplemental to your primary health coverage, you can use that money to pay the deductible, copays, coinsurance, or any other expenses that you might incur as a result of a hospital stay.
Closing the gap on coverage
With the ever changing health services landscape, assuming that you’d be fully covered in case of a crash is a sure way of setting yourself up for a costly disappointment. Buying the most comprehensive policy available may not be the wisest choice either because you might end up paying for coverage that you will never use. If you’re a family with young children, you should be looking at a low deductible plan with a low out-of-pocket maximum, that will allow you to visit doctors often, and at the lowest cost. If you’re a healthy individual who rarely visits a doctor, a High Deductible Health Plan might be your best choice since the savings you reap should easily offset the high cost of a rare doctor visit.
If you find yourself unable to work as a result of an illness or an accident, even the best health insurance policies have significant deductibles and will not cover lost wages. Such situations are rare, often unexpected, and tend to catch people off guard. Having a savings account to fall back on may provide the necessary relief, but may drain that account and financially expose you to other unforeseen circumstances. There’s a variety of insurance products on the market that are designed to fill the gaps in coverage and limit financial risks. Since these policies are designed to cover a very small subset of events, they are generally affordable.
Gap Insurance: Gap insurance policies, also known as supplemental insurance, are designed to work as a financial cushion for people with High Deductible Health Plans. The purpose of gap insurance is to lower the overall out-of-pocket costs by covering large deductibles and other costs after the primary medical has paid its share.
Short-term Disability: Short-term disability insurance benefit provides income replacement or compensation for non-job-related injuries or illnesses that make it impossible for you to work for a limited time period. Many employers offer this plan because they receive a federal tax deduction for doing so. You can also purchase this plan yourself from many major insurance providers. If you’re an athlete, such as a cyclist, in a profession that requires you to be able-bodied to perform your job, this plan is a must-have.
Medical gap for cyclists: Velosurance offers medical gap coverage designed specifically for cyclists, and because this coverage applies to a very narrow set of events, e.g. you getting hurt while riding your bike, it is extremely affordable. With limits designed to match the common out-of-pocket limits, this coverage is a perfect companion for any health insurance plan - especially HDHPs.
Scenario: One second you’re enjoying your post-work ride, the next you’re on the ground. After gathering your bearings, you access the situation and realize that while the bike wasn’t damaged, your personal being certainly is; you have some serious road rash on your leg and arm. To ensure your injuries are properly cleaned and dressed, you decide to go to a walk-in clinic. After treatment you walk out of the clinic with a bill for $250 which ends up getting declined by your health insurance company because you have not met your annual deductible. With bicycle insurance medical payments you can submit the bill for reimbursement of the $250.
Scenario: Imagine the above scenario, but instead of just a little road rash, this time you’re dealing with a broken collarbone. You’re able to drive to the hospital, where the visit will include treatment for the road rash, x-rays of the collar bone, and a CAT scan for a possible concussion. Three months later, you’re back to your riding rituals, only to find a hospital bill waiting for you in the mailbox. That forgotten hospital visit ended up costing $11,980. Your health insurance company has paid $9,230, now leaving you with your responsibility of $2,750 ($2,500 deductible and $250 emergency room copay). With Velosurance medical payments, you submit the $2,750 bill for reimbursement and receive a check within two weeks.
The cost to include medical payments in a bicycle insurance policy is minimal when compared to your annual deductible. Velosurance offers optional medical payments from $1,000 to $10,000 to cover the gap in your health insurance deductibles, coinsurance and copays. These medical payments are paid directly to you, up to the amount of coverage purchased, and will cover your out-of-pocket expenses related to bicycling accidents that cause medical injuries, or in the absence of any health insurance medical payments, can be used to help pay the medical bills.