What Is Major Medical Insurance? How to Tell What You Are Buying

What major medical means

Major medical insurance is comprehensive coverage for both the big events and the everyday: doctor visits, hospital stays, surgery, emergency care, prescriptions, lab work and imaging. It pays a share of the actual bill once you meet a deductible, and it limits what you pay in a year with an out-of-pocket maximum. When something serious happens, major medical coverage is what keeps a hospital bill from becoming a financial crisis.

Today the term usually covers:

• ACA-compliant individual plans, sold on HealthCare.gov, state exchanges or directly by insurers. They must cover the ten essential health benefits and cannot deny you for health reasons. The Marketplace coverage guide explains what they include.
• Employer group plans, including COBRA continuation of one.
• Some private, medically underwritten plans that are designed to work like comprehensive coverage. Approval depends on your health answers, and benefits vary by plan.

What major medical is not

Plenty of products are sold next to major medical, or instead of it. Each has a job, but none is a substitute for comprehensive coverage on its own.

• Short-term health plans. Temporary coverage for a gap. They are usually medically underwritten, generally exclude pre-existing conditions, often have a maximum benefit, and do not have to cover the essential health benefits. The short-term vs ACA guide compares the two.
• Fixed indemnity plans. These pay a set dollar amount for a covered event, such as a fixed sum per day in the hospital or per office visit, regardless of what the provider actually charges. If the bill is bigger than the benefit, you owe the rest.
• Hospital indemnity, critical illness and accident plans. These are separate policies tied to specific events, such as a hospital admission, a covered diagnosis or an injury. What they include varies by plan. They can sit alongside a high-deductible plan, not in place of one.
• Limited benefit plans. These cover a short list of services, or cap each benefit at a modest amount.
• Discount medical cards. Not insurance. They offer reduced prices at participating providers and pay nothing toward the bill.
• Health care sharing ministries. Not insurance either. Members share each other's medical bills under the group's guidelines, with no legal guarantee of payment. See the health sharing guide.

Why the difference matters

Picture a three-day hospital stay with surgery, billed at tens of thousands of dollars. On a major medical plan, you pay your deductible and coinsurance up to the out-of-pocket maximum, and the plan pays the rest of the covered, in-network amount. On a fixed indemnity plan that pays a set amount per hospital day and a set amount for the procedure, you receive those amounts and owe the hospital everything else. The indemnity plan's premium may be lower, but the protection is not in the same category.

The same logic applies to prescriptions, cancer treatment, a premature birth or a long rehab stay. Those are the expensive moments that comprehensive coverage exists for, and they are exactly where limited products tend to run out.

How to tell what you are buying

You do not have to read every page of a policy to know what it is. Look for these:

1. How it pays. A percentage of the bill after a deductible points to major medical. Fixed dollar amounts per day, visit or event point to indemnity coverage.
2. An out-of-pocket maximum. Comprehensive plans have one. If you cannot find it, ask.
3. Maximum benefits. Annual, lifetime or per-condition caps on what the plan pays are a sign of limited or short-term coverage.
4. Pre-existing condition language. Look for look-back periods, exclusions and waiting periods.
5. The core benefits. Check maternity, mental health, prescriptions and rehabilitation. Gaps there are common outside ACA plans.
6. Prescription coverage. Is there a real drug list, or only a discount?
7. The network. Are providers contracted to accept the plan's payment, or is it only access to discounted prices?
8. The term. Does it renew year after year, or end on a fixed date?
9. The disclosures. Limited and short-term products often include a notice saying they are not comprehensive coverage. Read the first page of the application and the policy, not just the brochure.
10. A Summary of Benefits and Coverage. ACA plans and employer plans must provide this standard document. If a product cannot give you one, ask why.

Where private plans fit

Private, medically underwritten plans are their own category, and they vary widely. Some are built to work much like comprehensive major medical coverage; others pay set amounts for some services, or combine different types of coverage in one package. Approval depends on your health answers, pre-existing conditions may be excluded or lead to a decline, and benefits vary by plan.

That is not a reason to avoid them. For a healthy household above the subsidy line, a private plan can be the best value available. It is a reason to know exactly how the plan pays before you apply, and that is the first thing I go over on a call. The underwriting guide explains how approval works.

Where Marketplace plans fit

Every Marketplace plan is major medical by definition. It accepts everyone, covers pre-existing conditions and has no annual or lifetime dollar limits on essential benefits. The trade-offs are full price above the subsidy line, a once-a-year enrollment window and, in many areas including much of Florida, HMO or EPO networks tied to a local hospital system.

Is a limited plan ever the right call?

Sometimes. A short-term plan can bridge a gap with a known end date. A hospital indemnity or critical illness plan can add cash on top of a high-deductible plan. The problem is when a limited product is sold, or bought, as if it were the main coverage. If a plan sounds inexpensive for everything it seems to promise, read how it pays.

There is no federal penalty for going without comprehensive coverage, but a few states, along with Washington, D.C., have their own coverage requirement. Florida does not. Either way, the real risk of going without major medical is the bill, not the penalty.

Questions to ask before you buy

• Is this major medical coverage, or a supplement or limited plan?
• Does it pay a percentage of the bill or a fixed amount?
• What is the out-of-pocket maximum, and what does not count toward it?
• Are there annual, lifetime or per-service caps?
• How are pre-existing conditions handled, and is there a waiting period?
• Are my doctors, hospital and prescriptions covered?
• Is maternity covered? Mental health?
• How long does the coverage last, and can it be renewed?
• Can I see the full plan documents before I apply?

Where I fit

I am an independent broker, so I can show you ACA plans and private plans side by side and tell you plainly which category each one falls into. I work by phone and video in 31 states, including Florida and Texas. Start a quote or call (786) 218-2384.