How to Decide If Cancer Insurance Is Worth the Cost

Cancer insurance is a relatively new vehicle in the world of health insurance programs. No matter the type, cancer can present many challenges, including financial burden. Given the ever-increasing rates of cancer in the U.S. and the often exorbitant costs of cancer treatment, supplemental cancer insurance is an emerging trend.

This supplemental insurance product was designed to help reduce out-of-pocket expenses and bridge the gap between what your primary insurance does and doesn't cover.

But the question is this: is it really worth it?

What Cancer Insurance Is

Cancer insurance was not designed to replace a traditional health insurance plan, but to compliment it by paying for treatment-related expenses not covered by your policy. There are two ways in which this insurance works:

• With most plans, if you've been diagnosed with cancer, you will receive a lump sum of money you can use for both medical costs and normal living expenses. You essentially use the money any way you choose to make up for lost wages, deductibles, and co-pays.
• Less commonly, a policy may provide coverage for cancer-related expenses above and beyond what your primary health insurance policy covers. What is actually covered can vary enormously and may, at times, have the same exclusions as those in your primary plan.

These policies go into effect after the insurance company receives documentation of your cancer diagnosis. There is usually a waiting period after purchase before it goes into full effect.

Eligibility for Cancer Insurance

To be eligible for cancer insurance, you usually cannot have a pre-existing condition that predisposes you to cancer. For example, you cannot have been diagnosed with endometrial cancer and then apply for a policy.

In most cases, people who have previously been diagnosed and treated for cancer are also ineligible. Other groups, such as those with HIV, are typically excluded because the disease is associated with an increased risk of certain types of cancer.

What Cancer Insurance Does and Doesn't Cover

While cancer insurance coverage varies based on the provider and policy details, most plans do cover both medical and non-medical expenses.

Medical expenses can include copays, extended hospital stays, lab tests, disease-specific treatments, and procedures like stem cell transplants. Non-medical expenses can include home health care, loss of income, child care cost, and dietary restriction aids.

Cancer insurance usually does not cover any of the costs related to non-melanoma skin cancer. In addition, those who have early cancers, such as carcinoma in situ, may only get a reduced payout, typically half or less of what you might receive with a cancer diagnosis.

Know the Facts Before Shopping for Cancer Insurance

There is a lot of debate about disease-specific health plans. Some people firmly support them while others believe that they are merely money-making machines that prey on people's fears.

Here are some points to consider when thinking about buying a cancer insurance plan:

• Know your cancer risk. Those with a strong family history of cancer may want to take a look at their current policy and see if cancer insurance can complement coverage. The same applies to those with a genetic predisposition for cancer, as in people with the BRCA2 mutation.
• See if upgrading your existing policy can provide the coverage you need. Choosing to upgrade your current policy may be a better option for those at average risk of cancer. It may cost less to upgrade and provide a wider range of benefits for non-cancer-related conditions.
• Remember that two policies don't necessarily double the coverage. Having basic comprehensive health insurance along with a cancer-specific insurance plan does not necessarily mean that you will get double the benefits. Oftentimes, a treatment excluded by one policy may also be excluded by the other.
• Read the Coordination of Benefits clause. Most major insurance policies have a Coordination of Benefits (COB) clause which states that the insurer will not cover expenses that another plan does. By purchasing cancer insurance, you may, in fact, be degrading the benefits provided in your primary plan. It is not unusual for two providers to contest the other's liability without either assuming coverage. While these issues can usually be sorted out, they can cause a lot of unnecessary headache and a waste of time.

Other Insurance Options

If you are concerned about the financial hit your family could take if you get cancer, there are a few other options you can consider:

• Setting up a health savings account (HSA) or a flexible spending account (FSA) through your employer can allow you to put money aside, tax-free, for expenses above and beyond those covered by your insurance.
• A critical illness insurance plan may provide coverage for cancer and other types of critical illnesses, such as a heart attack or stroke. Remember, it's important that you read the fine print to understand what conditions (or stages of illness) the policy covers.
• If concerned about lost wages, consider investing in short-term disability insurance which pays out for any medical condition that affects your ability to work.

Take Home Messages

Before purchasing any cancer insurance plan, there are four rules of thumb you should always follow:

• It is important that you understand exactly what is covered in a policy, what is excluded, and what the waiting period is before you are able to access benefits. 
• You should always compare the benefits of a supplemental policy with those of your primary policy to see where there is any overlap or redundancy. There is no sense in buying cancer insurance if your current one covers most or all of the same expenses. 
• If you believe that the cost of cancer treatment is not adequately covered by your primary plan, consider whether upgrading your policy can fill those gaps.
• If you decide that cancer insurance is a viable option, take the time to shop around. This includes shopping for other types of coverage including long-term disability insurance.

Finally, it is important to remember that there are many tax deductions for people with cancer. By keeping a careful record of all out-of-pocket expenses, including travel to and from your clinic, you can mitigate some of your annual tax exposure and save money.