Major medical insurance is designed to cover you during everything from routine check-ups to major catastrophic events. Basic health insurance, by contrast, is a cash reimbursement service that can help you pay for some—but not all—types of medical services.
Basic Medical Expense Plans. Medical expense insurance pays benefits for nonsurgical doctors' fees commonly rendered in a hospital, and sometimes pays for home and office calls as well. Basically, medical expense insurance can pay for all medical treatment and services (always dependent upon the policy).
basic plans offer less coverage for lower premiums than major medical insurance. Ideally, the basic plan functions as a supplement to traditional medical insurance; however, sometimes these basic plans are all people can afford. Subscribers pay a low premium for coverage and receive set amounts of cash to reimburse them for events including doctor visits, lab tests and surgery. The reimbursement amounts will almost always be lower than the total cost of services provided.
Basic Benefits
It's easier to be approved for basic health insurance than major medical insurance. According to insurance broker MedSave, there aren't any co-payments, co-insurance amounts, deductibles or "network" doctors. You can see any doctor in the U.S. at any time you want, without approvals or referrals. You won't be asked about any pre-existing medical conditions on your application. However, both Markel Insurance Company and MedSave specify that treatments for pre-existing conditions will only be reimbursed after a six-month waiting period.
Major Medical Insurance (Indemnity Plans)
Major medical expense policies were a natural outgrowth of basic medical expense policies. Since basic medical expense policies had low dollar limits of protection, the need for a more comprehensive form of protection was realized and provided in the form of major medical policies. Typically, a major medical policy provides a substantial dollar amount of protection, usually $1,000,000, but that amount could be more or less depending on the company writing the policy. New York sets the following minimal limitations for a major medical company:
- No less than a $100,000 benefit;
- Coinsurance cannot exceed 25%; and
- Deductibles not to exceed 5% of one above or basic coverage benefits, if greater.
Characteristics
Major medical expense contracts are characterized by high maximum limits, blanket coverage, coinsurance, and a deductible. Dollar deductibles are paid up front, and the coinsurance, or sharing of the cost, is paid after the deductible is met and the claim is submitted.
Common Limitations
Generally, most major medical plans cover most medical expenses in and out of the hospital, and they have high maximum benefit limits. These plans are called covered or eligible expense plans.
Exclusions from Coverage
The following are among the exclusions found in major medical insurance policies:
- Injuries caused by war;
- Intentionally self-inflicted injuries;
- Regular dental/vision/hearing care;
- Custodial care;
- Injuries covered by workers compensation insurance; and
- Cosmetic surgery (unless necessitated by a birth defect or an accident).
Provisions Affecting Cost to Insureds
Major medical policy premiums vary depending on the amount of the deductible, the coinsurance percentage, the stop-loss amount and the maximum amount of the benefit.
Most companies incorporate an annual deductibleinto their major medical policy. A typical deductible could range from $100 to $2,500. The deductible amount is the portion of medical expenses that are paid by the insured each year before the insurance benefits start. The higher the deductible, the lower the annual premium for the coverage will be. In other words, if you accept more risk through a higher deductible, the insurance company lowers your premium.
Once the deductible has been met, the insured and the insurance company share the following expenses in what is called coinsurance. Generally the insurance company pays the larger share of 90/10, 80/20 70/30 or possibly equally on 50/50. The smaller the percentage that the insurance company pays, the less the premium will be. Coinsurancehelps to keep cost down by requiring the insured’s participation in the ongoing expense.
Many insurance companies include a stop-loss feature in their major medical policies. The stop-loss amount would be the amount that the insured pays out of pocket during the year. When the insured’s out-of-pocket expenses reach the stop-loss, the insurance company then provides coverage at 100% of eligible expenses for the remainder of the year. The out-of-pocket expenses that qualify for the stop-loss would be the insured’s portion of the coinsurance and it may or may not include the deductible. The higher the stop-loss, the lower the premium will be.