Major Medical

What are the principal types of medical expense insurance coverage?

Medical expense insurance is broadly classified into two principal types of coverage: base (or basic) plans and major medical plans. Base plans generally consist of either hospital expense coverage, surgical expense coverage, or both. Basic hospital and surgical expense plans generally provide coverage with no deductible and provide 100 percent reimbursement of covered expenses, up to a relatively low maximum of $10,000, $25,000, $50,000 or $100,000. Major medical plans, in contrast, apply a deductible to initial expenses, generally ranging from $100 to $500 per calendar year. After the deductible is satisfied, major medical plans typically reimburse 80 percent of eligible expenses up to a relatively high maximum, e.g., $500,000 or $1,000,000. Some major medical plans reimburse eligible expenses at 70 percent; some plans also provide unlimited lifetime benefits. Major medical plans typically cover a broad list of medical expenditures, including hospital expense, surgical expense, physician (non-surgical) expense, private duty nursing, diagnostic X-ray and laboratory services, prescription drug expense, artificial limbs and organs, ambulance services, and many other types of medical expenses when prescribed by a duly licensed physician. Thus, in comparison with basic plans, major medical plans provide much broader coverage, with higher limits, but these plans require the insured to share in the cost of medical care through deductibles and coinsurance (i.e., 20 or 30 percent of eligible expenses above a deductible amount).

What is the coinsurance clause in medical expense plans and how does it work?

Coinsurance, sometimes called "percentage participation," requires you to share in the cost of medical care. Under an 80/20 coinsurance provision, the medical expense plan pays 80 percent of eligible medical charges above any deductible. You are required to pay the remaining 20 percent. In the event of large or catastrophic medical expenses, an insured might suffer severe financial hardship due to the operation of the coinsurance clause. To compensate for this possibility, many major medical expense plans contain a coinsurance cap, or stop-loss limit. This provision places a limit on the insured's out-of-pocket costs in a given year arising from the operation of the coinsurance clause. The size of the coinsurance cap generally ranges from $2,000 to $3,000, depending on the plan, although limits as low as $1,000 are sometimes used. Once the coinsurance cap has been reached, all eligible expenses above this amount are paid in full, up to the plan's overall limit of coverage.

What is a preexisting conditions clause and what is the effect of its inclusion in major medical expense plans?

A preexisting condition is often defined as a medical condition (i.e., an injury or illness) that required treatment during a prescribed period of time, e.g., 3 or 6 months, prior to the insured's effective date of coverage under the major medical expense plan. Sometimes, a preexisting condition is defined to include medical conditions that were known to the insured, even though no treatment was provided during the prescribed period. A preexisting conditions clause excludes coverage for preexisting conditions for possibly as long as 12 months after the effective date of coverage. Because the definition of a preexisting condition, and the provisions of the clause itself, may differ considerably from one plan to another, it is recommended that newly insured individuals (and prospective insured) completely familiarize themselves with this policy provision.

Request Product Information