By : Carlos Diez
Major medical expense insurance plans provide broad coverage and significant protection from large, unpredictable, and therefore, catastrophic health care expenditures. From the beginning, most plans covered a wide range of medical charges with few internal limits and a high overall maximum benefit.
Although born as a supplement to basic health insurance plans, there is now a stand alone package known as a comprehensive major medical plan. Comprehensive major medical expense insurance covers virtually all types of medical care services and supplies. The reimbursement formula applies to the total covered expenses subject to a deductible. Thus, a simple comprehensive plan could provide for the reimbursement of 80 percent of all combined covered expenses incurred in a calendar year after the deductible up to a lifetime maximum usually from 3 to 8 million depending on the insurance carrier. The main advantages of comprehensive major medical plans are simple plan design, fewer first dollar benefits to help control cost and utilization, and avoidance of duplicate coverage or frequent plan provisions. Major medical plans cover usual and reasonable customary charges incurred for most medical care services, supplies, and treatments prescribed as necessary. Exact eligible charges and their description vary from plan to plan. Coverage for confinements in skilled nursing facilities as well as home health care services and hospice care expense benefits are also covered. It is important to understand your deductibles and coinsurance.
Deductibles. A deductible is a specified amount of initial medical cost that the participant must pay before any cost are paid by the plan. Thus, in a plan with a $300 deductible, the participant must pay the first $300 in expenses for covered health care services. The deductible provision usually has a family limit to equal to two to three times the individual limit. After the deductible has been satisfied, the plan pays for additional health care expenses according to other plan provisions. In the past, a number of plans offered first dollar coverage with no deductibles or coinsurance required. Such plans have declined significantly in number in recent years. In meeting the deductible amount, an accumulation period feature recognizes the fact that small, frequent medical expenditures can accumulate to a significant amount in some cases. The accumulation period provision defines the period of time during which incurred medical expenses may be accumulated to satisfy the deductible. A variety of deductible provisions exist. The type and amount of the deductible and the way it operates, as with all design aspects of a plan, reflect the policy owner’s desires and the underwriting requirements of the insurer. Deductibles can be classified as all cause, per cause, corridor, and integrated. Under the all cause deductible, all expenses incurred are accumulated to satisfy the deductible regardless of the number of illnesses or accidents giving rise to the expenses.
Under the per cause deductible, all expenses incurred because of the same or related causes are accumulated to satisfy the deductible. Benefits are paid, following the satisfaction of the deductible, for expenses incurred during the remainder of the benefit period. The calendar year is almost universally used for both the deductible accumulation period and the benefit period. It is also usual to include a carryover provision. Under such provision, expenses incurred in the last three months of a calendar year may be carried over to be used in satisfying the deductible for the next calendar year. A family deductible provision is usually included that waives the deductible for all family members after any two or three of them individually have satisfied their deductibles within the same year.
A corridor deductible, used in connection with supplemental major medical plans, reflects the fact that it applies after the basic plan benefits have been exhausted. The corridor deductible must be satisfied by additional incurred expenses before the supplemental major medical benefits are payable. Supplemental plans also may use an integrated deductible. This deductible is defined as the greater of (1) a fairly high amount, such as $500, or (2) the basic plan benefits. For example, if the basic plan paid $625 and the stated value of the deductible was $500, the deductible would be deemed to have been met and supplemental major medical benefits would be payable. Coinsurance The term coinsurance refers to the percentage of covered expenses paid by a medical expense plan. Thus, a plan with 80 percent coinsurance will pay 80 percent of covered expenses while a person who receives benefits under the plan must pay the remaining 20 percent. The term percentage participation is used in some plans. Many plans apply a cap to the coinsurance and deductible amount to be borne by the insured by eliminating coinsurance for the balance of the calendar year.