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Major Medical Insurance Policy

Catastrophic & Major Medical Insurance

9,700 Reasons to Get a Catastrophic Health Policy

The total cost for all hospital stays in the U.S. in 2010 was $375.9 billion, and the average cost per stay was $9,700, according to a statistical brief released in 2013 by the Healthcare Cost and Utilization Project. Of the 20 most expensive conditions to treat, septicemia (also known as “sepsis,” a condition where the body has a severe response to bacteria or other germs) tops the list, and has been the fastest rising percentage change since 1997.

If you’ve been searching for an affordable way to make sure you are prepared for a serious health condition, major medical insurance coverage may be what you need. Also known as catastrophic insurance, this coverage can be an excellent emergency safety net. There are key coverage differences between major medical and health insurance, so it’s important that you fully understand the policy you are considering and know that it meets your needs before you purchase.

Who Can Benefit from Major Medical Insurance?

  • A person who is self-employed
  • A person who is healthy but on a budget
  • People who are seeking supplemental coverage
  • Someone concerned only with emergency coverage
  • Someone whose employer doesn’t offer health insurance
  • An early retiree who doesn’t qualify for Medicare

What Does Major Medical Insurance Cover?

You will find that most major medical insurance companies offer plans that cover catastrophic circumstances, like hospital stays and large medical expenses. You may also hear this plan referred to as a “hospital-only” plan or short term major medical insurance because they have a very high deductible but put a cap on annual out-of-pocket expenses to keep long-term and expensive medical care affordable.

Because of the requirements of the Affordable Healthcare Act, all major medical insurance carriers now include coverage for preventive care and most immunizations, but these policies are not available on the state or federal healthcare exchanges and must be purchased on the private market.

If you purchase a major medical insurance policy, you may be eligible to use a health savings account, also known as an HSA. For many people, this provides a method to pay for the healthcare expenses that aren’t covered by a major medical policy. There are a few important details to understand. For example, you cannot use your HSA funds to pay your health insurance premiums unless you’re unemployed. You’re responsible for contributions to the HSA, but any money left in the account accrues tax free interest.

While major medical insurance quotes might be appealing because they are lower cost than a standard health insurance plan, keep in mind that the deductibles on these plans are very high so you will be paying out-of-pocket for most medical care until your deductible is met. This can result in significant expenses to you if you need to have routine outpatient surgery or break a bone or take medications that can be overwhelmingly expensive without prescription drug coverage, which may or may not be included in your policy.

How Much Does Major Medical Insurance Cost?

All catastrophic health insurance quotes include a high deductible, which keeps your premiums affordable. The average deductible for this type of policy is $3,989 for an individual and $7,657 for families, according the eHealth Price Index. Until your deductible is met, you are responsible for all medical costs not covered in your policy, so it’s important to take that into consideration when reviewing catastrophic health insurance quotes.

Catastrophic health insurance companies provide premiums as low as $30 per month and as high as $300 per month. The rate you pay will be based on several different variables, including the plan’s coverage and the deductible you choose. Comparing plans can be time consuming, but a Trusted Choice member agent can simplify the process and provide several major medical insurance quotes that match your needs.

The “Pros” of a Major Medical Insurance Policy:

  • Emergency coverage
  • No lifetime limits
  • Preventive care coverage, as mandated by the ACA
  • Affordable premiums
  • HSAs can grow without being taxed

The “Cons” of a Major Medical Insurance Policy:

  • High deductibles
  • May not quality for HSA pairing
  • Limited coverage
  • Significant out of pockets costs

Searching for the right health insurance involves weighing your pros and cons, and also taking stock of your options. It’s a good idea to start researching rate quotes for major medical insurance policies with reputable, local insurers that can provide you the services you need at a cost that makes sense for your bottom line. It’s highly recommended that you seek out at least three rate quotes before you make a purchase and that you get all your options in front of you before you commit to a particular plan.

What is Major Medical Insurance?

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Major medical insurance plans are long-term, comprehensive medical plans that can cover your health needs if you get sick or injured. They’re also your go-to plans for preventive care, like your yearly check-ups. Major medical plans offer day-to-day peace of mind.

Who Needs Major Medical Insurance?

You know the drill — you wake up with a stuffy nose, and it turns into a stuffy head. You feel worse as your day goes on, and you realize you have a fever. What should you do? Many people in this position will decide to go to the doctor. But doctor’s visits, even visits for minor problems like a bad cold or the flu, can cost a bundle. What’s the answer? Most Americans who can afford to go to the doctor can do so because they’ve bought something called major medical insurance.

How is major medical insurance different from other forms of insurance?

First of all, let’s distinguish between the major categories of insurance policies. You can buy insurance for almost any eventuality that you can imagine will cost you money: protection for your car, house, and possessions; protection for your family from financial hardships in case of your death; and, perhaps the most common form of insurance, protection for healthcare costs. Healthcare insurance can come in different forms. Your dental or vision care often isn’t considered part of your healthcare, so those kinds of insurance are separate policies. You can buy separate accident insurance in case you have a catastrophic injury or long-term care insurance in case you get sick with a disease that will take extra medical care, such as with cancer. And then there’s major medical insurance. What is “major medical” health insurance? It’s insurance that covers your most common medical needs. Many plans include things like the following:

  • Preventive care, like checkups at the doctor
  • Medication
  • Emergency services care
  • Services related to pregnancy and maternity
  • Inpatient or outpatient mental healthcare
  • Labwork

These are just a few examples of situations covered by major medical insurance; it’s intended to be comprehensive coverage for many of the health needs that most Americans will encounter in their lifetimes.

What is major medical insurance’s relationship to the Affordable Care Act?

Under the Affordable Care Act (the ACA or, more commonly, “Obamacare”), most Americans must pay a fine if they don’t have sufficient major medical insurance. That’s why it’s very important for you to find a major medical insurance policy that fits the bill (Literally!). HealthMarkets Insurance Agency can help you understand your different major medical insurance options and pick one that fulfills Obamacare requirements.

We can help you learn all about your major medical insurance options. You can look at our blog for details, or call one of our thousands of licensed agents today to get started comparing major medical insurance plans.

How Major Medical Insurance Works

Understanding medical insurance and how insurance companies work is of paramount importance when you are trying to find the best health care policy for your needs (and budget). The first things you want to understand are your rights and responsibilities.

Defines basic health plan terminology you’ll want to understand

Explains out-of-pocket expenses like deductibles, co-insurance, and co-payments

Describes the legal protections associated with major medical insurance

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The health insurance premium

You should see buying a medical insurance policy as more of an ongoing process than a one time purchase. To maintain your health coverage, each month you pay a fee, or premium to your medical insurance company.

This payment is similar to club dues. The money is not earmarked specifically for your use, but is instead the cost of membership. In this case, your premium won’t go only towards your future health care services. Instead, this is the fee you pay to be covered by your health insurance company.

The deductible, co-payment and co-insurance

It is important to understand that the cost of health services is not completely eliminated by paying the monthly premium. There are other costs associated with major medical insurance coverage that you have to meet.

The first cost we’ll discuss is the deductible. The deductible is a pre-arranged dollar figure that you’ll have to satisfy (pay) before the health insurance company begins to contribute any money to your health care costs.

Your deductible can be a significant out-of-pocket expense, particularly because it must be satisfied each year before the company pays. (So paying $1000 this year for medical services will not decrease your deductible next year.)

Deductibles can range from a few hundred dollars to a several thousand. While some health insurance policies do not involve deductibles, others involve them only in certain cases. Again, the higher the deductible, the lower your monthly premiums.

The other expenses you will encounter are co-payments and your co-insurance. All medical insurance policies will require that you agree to one or both of these types of charges. A co-insurance payment means that you will be required to pay a certain percentage of your health care costs, while a co-payment means you’ll be required to pay a certain, pre-set dollar amount for each medical service you receive before your medical insurance kicks in.

These are usually charged in addition to your deductible. In either case, the medical insurance company will pay a substantial amount of your medical costs in comparison to your financial responsibility.

The point of having medical insurance is, after all, to alleviate the financial burden on you and your family in case of medical emergencies and/or a chronic illness.

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Finding the right plan now is the wisest action you can take to assure the future health and security of both you and your family.

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Other rights and responsibilities

Medical insurance isn’t an all-or-nothing proposition. Major medical insurance policies will contain statements that protect both you and your health insurance company from having to pay too much money for services. It has been said that insurance companies don’t make money selling insurance but on denying claims. As far as the insurance company is concerned, they will generally limit the coverage they sell you.

Medical insurance companies protect themselves by employing what is called a “lifetime payout provision.” Such a provision limits the total amount the health insurance company is responsible for paying in your entire lifetime. This maximum payout is usually in the millions of dollars.

It is important to have a high maximum payout, or you will run the risk of prematurely depleting your coverage just when you need it most.

The provision that protects you is called the out-of-pocket maximum and it limits your out-of-pocket expenses during a given year. Once this limit is reached, your medical insurance company will compensate you for 100% of your health care costs. This limit is particularly important in the event of a serious illness or accident.

Major Medical Insurance

Major medical insurance is a form of health care coverage that provides benefits for most types of medical expenses that may be incurred. Offering more complete coverage with fewer gaps, major medical insurance covers a much broader range of medical expenses – including those incurred both in and out of the hospital – with generally higher individual benefits and policy maximum limits. These more extensive medical insurance policies are divided into two general groups: comprehensive major medical insurance, in which the traditional basic coverages and essentially any other type of medical expense are combined into a single comprehensive policy; and supplemental major medical insurance, in which coverage begins with a traditional basic policy that pays first, with the major medical coverage added to pick up expenses left uncovered by the initial basic policy. Let’s look at each of these groups and examine how the generally operate.

Comprehensive Major Medical

Most major medical policies begin paying benefits after the deductible is satisfied. The policy’s deductible is considered satisfied as long as the insured individual can show evidence of having incurred and paid the necessary covered expense. There are essentially two classes of comprehensive major medical plans: those that provide first dollar coverage, and those that do not. With first dollar coverage, as soon as covered medical expenses are incurred, the policy immediately begins to pay benefits. Consequently, policies with first dollar coverage effectively have a deductible amount of zero. Without first dollar coverage, the insured must first pay out-of-pocket a specified deductible amount, and when that amount of incurred covered expenses has been paid, the policy will then begin to pay benefits.

As an example, let’s assume that before Mr. A’s major medical policy will pay anything, he must pay the first $400 of medical expenses each year. Mr. A does not have first dollar coverage; in other words, he must pay a deductible. Conversely, as soon as Mr. B was hospitalized with an acute illness, his major medical policy began paying for his expenses. He, therefore, does have first dollar coverage, and incurs no deductible.

Another important feature of major medical coverage is the concept of coinsurance, which is the sharing between the insurance company and the insured of any covered expenses that exceed the deductible amount. (In some regions, this is also known as percentage participation.) The insurer always carries the bulk of these expenses, usually paying 80% while the insured is responsible for the remaining 20%. Other proportions (as stipulated in the particular policy) may also be used, such as 75/25. Coinsurance works in this manner: Ms. C’s major medical policy has a $200 deductible and 80/20 coinsurance. She incurs covered medical expenses totaling $1,200. Ms. C must first pay the $200 deductible. This leaves $1,000 of expenses to be shared on an 80%/20% basis, she being responsible for the lower amount, or an additional $200. The insurance company must pay $800 of remaining $1,000 (the 80% share). Ms. C, therefore, has to pay $400 of the total $1,200.

It should be mentioned that, in some policies, certain types of medical expenses are not subject to the deductible, while others are. It’s not unusual, for instance, that the deductible be waived for initial hospital or surgical expenses up to a specified amount; say, for example, the first $5,000 of such expenses. In this case, the insured would pay no deductible (in essence receiving first dollar coverage on the first $5,000 of hospital and surgical expenses), but would then be required to pay the deductible amount before his or her major medical policy covered any further expenses. After satisfaction of the deductible, the insurer and the insured would share in paying the remaining expenses on an 80/20 allotment (or whatever percentage the policy states).

Most major medical policies today also include a stop-loss limit (or out-of-pocket limit), which is a dollar amount beyond which the insured no longer has to participate in the payment of covered expenses. After the insured’s total deductible and coinsurance payments reach that amount, the insurance company picks up the entirety of any further covered expenses, up to a stated maximum benefit amount. Lifetime maximum benefit limits on current health care policies may range from $100,000 to $2 million, with some policies even having unlimited benefits. And just as the maximum benefit amount can vary considerably, so can the stop-loss limit, depending upon the individual policy and insurer.

Supplemental Major Medical

When a supplemental major medical policy is used, it typically backs up and enhances a basic policy that usually includes hospital, surgical and medical coverage along with an additional policy covering the broader range of medical expenses. Generally, the basic plan will pay covered expenses with no deductible, up to the policy’s limit. Above that limit, the supplemental policy kicks in, operating in exactly the same manner as a comprehensive policy that does not provide first dollar coverage. In simpler terms, after the basic policy’s limits are reached, the insured must pay a deductible, after which the supplemental major medical coverage begins to pay. Since the deductible actually occurs between the basic and supplemental policies, it’s often referred to as a corridor deductible. Like the comprehensive major medical plan, a supplemental policy is likely to include a stop-loss limit and a maximum lifetime benefit limit.

Types of deductibles

There are a number of ways that deductibles can be administered in major medical policies. Some plans have a per-cause (injury or illness) deductible, while others may use an all-cause deductible. With a per-cause deductible, the insured pays one deductible for all expenses incurred from the same illness or injury. The benefit period for each “cause” (or occurrence) begins when the deductible for that particular injury or illness has been satisfied, and may run for one- to two years. Here’s how it works: suppose that Ms. D suffered a major illness early in the year from which she continued to incur medical expenses through July. Then, in September, she was injured in an automobile accident that hospitalized her for two weeks. In addition to being quite unfortunate, Ms. D had to pay a separate deductible for each of these incidents because her policy has a per-cause deductible.

On the other hand, had Ms. D’s policy contained instead an all-cause deductible (which is also known as a “cumulative” or “calendar year” deductible), her incurred covered expenses for any number of occurrences (whether differing or incidences of the same type) would have been accumulated to meet the deductible during a single calendar year. Once enough covered expenses were been paid by the insured to meet the stated deductible, all other covered charges during the remainder of the calendar year would have been paid according to the coinsurance schedule.

Policies that cover entire families usually have a family deductible rather than deductibles that apply to each individual. For example, although a policy’s individual-person deductible is, say, $200, the family deductible amount might be $400. Thus, even a family with six members would pay no more than a total of $400 in deductible expenses, as opposed to the $1,200 that would be required if every member had to meet the $200 individual deductible.

The time during which benefits are paid, known as the benefit periods, are generally dependent upon the deductible and any internal limits that may be included in the major medical policy. For instance, when a deductible amount has to be paid, the policy’s benefit period could begin either on the first day of the illness (or accident) or on the date that the insured satisfies the full deductible (if this is later than the date of the occurrence), and may extend for up to two years. In other cases, the benefit period ceases at the end of the calendar year and begins anew with a new deductible.

Internal limits are benefit limitations placed on specific coverages within the major medical policy. For example, the policy might limit both the hospital room and board benefit and the number of days that benefits will be paid. In such a case, the benefit period for room and board would be the number of days that have been specified as the limit. Other examples of internal limits might be restrictions placed on convalescent care days, mental health care, the number of X-rays per claim, etc.

All major medical policies, whether comprehensive or supplemental, provide a wide range of benefits. The precise services covered may vary somewhat from policy to policy, but most major medical plans include coverage for many of the following services and procedures:

  • Hospital inpatient room and board including intensive and cardiac care
  • Hospital medical and surgical services and supplies
  • Physicians’ diagnostic, medical, and surgical services
  • Other medical practitioners’ services
  • Nursing services including private duty service outside the hospital
  • Anesthesia and anesthesiologist services
  • Outpatient services
  • Ambulance service to and from a hospital
  • X-rays and other diagnostic and laboratory tests
  • Radiological and other types of therapy
  • Prescription drugs
  • Blood and blood plasma
  • Oxygen and its administration
  • Dental services resulting from injury to natural teeth
  • Convalescent nursing home care
  • Home health care services
  • Initial purchase of prosthetic devices
  • Casts, splints, trusses, braces, and crutches
  • Rental of durable medical equipment (DME) such as hospital-type beds and wheelchairs.

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