What Is Major Medical Coverage & What Does It Cover?

What Is Major Medical Coverage?

Major medical coverage refers to health insurance plans designed to provide comprehensive protection against significant healthcare costs. It serves as a financial safety net, covering a wide range of medical services from routine care to serious illnesses and hospitalizations. This type of coverage is distinct from more limited plans, such as short-term health insurance or fixed indemnity plans. When people discuss typical health insurance, they are usually referring to major medical plans due to their comprehensive nature and focus on minimizing out-of-pocket expenses for policyholders.

Core Components of Major Medical Plans

Major medical plans incorporate several financial mechanisms that determine how costs are shared between the policyholder and the insurance company. These mechanisms include deductibles, coinsurance, copayments, and out-of-pocket maximums.

A deductible is the specific amount a policyholder must pay for covered healthcare services before their health insurance plan begins to contribute to the costs. For example, if a plan has a $2,600 deductible, the individual is responsible for the first $2,600 of eligible medical expenses in a plan year. After this amount is met, the insurance plan will start sharing the cost of services. Deductibles reset at the beginning of each new plan year.

Coinsurance represents the percentage of covered medical expenses an insured individual is responsible for paying after their deductible has been satisfied. This arrangement means the policyholder and the insurer share eligible costs, with a common split being 80/20. For instance, if a service costs $1,000 and the coinsurance is 20%, the individual would pay $200. Coinsurance continues until the policyholder reaches their out-of-pocket maximum.

A copayment, often called a copay, is a fixed dollar amount paid by the policyholder at the time of receiving certain healthcare services, such as a doctor’s visit or filling a prescription. Unlike deductibles or coinsurance, copays are paid upfront and are usually smaller, set amounts. The amount of a copay can vary depending on the type of service, with specialist visits often having a higher copay than primary care appointments. While some plans may count copays toward the deductible, many do not, though they generally contribute to the out-of-pocket maximum.

The out-of-pocket maximum is the absolute limit on the amount of money a policyholder has to pay for covered healthcare services in a plan year. This cap includes payments made towards deductibles, coinsurance, and copays. Once this maximum is reached, the health plan is responsible for paying 100% of all covered healthcare costs for the remainder of that plan year. This feature provides financial predictability, protecting individuals from excessive medical bills in the event of a serious illness or injury.

Services Typically Covered

Major medical health insurance plans provide comprehensive coverage for a broad array of medical services. These plans aim to cover necessary care, ensuring individuals have access to a wide range of healthcare provisions.

Major medical plans generally cover:

• Hospitalizations, including inpatient care for surgeries, medical treatments, and recovery.
• Outpatient services, such as doctor visits, specialist consultations, and care without an overnight hospital stay.
• Emergency services, which address immediate medical needs regardless of severity.
• Prescription drugs, assisting with the cost of prescribed medications.
• Preventive care services, such as annual check-ups, screenings, and immunizations, often at no additional cost to encourage early detection.
• Mental health and substance use disorder services, including behavioral health treatment, counseling, and psychotherapy.
• Laboratory services for diagnostics and testing.
• Pediatric care for children.

Common Exclusions

While major medical insurance plans offer extensive coverage, certain services and situations are typically not included. These exclusions can vary between plans, but general categories exist.

Common exclusions include:

• Cosmetic surgery, unless medically necessary for reconstructive purposes after an injury or illness.
• Experimental or unproven treatments, as these services lack established medical efficacy or are not yet approved.
• Services deemed not medically necessary by the insurer, which means they are not required to diagnose or treat a health condition. This determination is often based on clinical guidelines.
• Care received outside of the plan’s network without proper authorization, particularly for non-emergency situations, which generally results in significantly higher out-of-pocket costs or no coverage.
• Specific exclusions for services like long-term care, adult dental or vision care (unless part of an essential health benefit), or services related to workers’ compensation claims.

Major Medical Plans and the Affordable Care Act

The landscape of major medical coverage in the United States was significantly reshaped by the Patient Protection and Affordable Care Act (ACA), often referred to as Obamacare. This legislation fundamentally redefined what constitutes comprehensive health insurance and established new standards for coverage. Plans that are compliant with the ACA are generally what is understood as major medical coverage in the current era.

A key provision of the ACA is the requirement for most individual and small-group health plans to cover Essential Health Benefits (EHBs). These ten categories of benefits include:

• Ambulatory patient services
• Emergency services
• Hospitalization
• Maternity and newborn care
• Mental health and substance use disorder services
• Prescription drugs
• Rehabilitative and habilitative services
• Laboratory services
• Preventive and wellness services
• Pediatric services, including oral and vision care

The ACA mandates that these EHBs be covered without annual or lifetime dollar limits.

The ACA also introduced protections against pre-existing condition exclusions, meaning health insurance companies cannot deny coverage or charge higher premiums based on an individual’s past or current health status. This “guaranteed issue” provision ensures that anyone who applies for coverage during open enrollment periods, or qualifying special enrollment periods, can obtain a policy regardless of their medical history. Before the ACA, insurers in many states could deny coverage to individuals with pre-existing conditions, which limited access to major medical plans.

The ACA eliminated annual and lifetime limits on the dollar amount an insurer would pay for essential health benefits, providing greater financial security for policyholders facing high medical costs. The ACA’s framework ensures that plans offered through the Health Insurance Marketplace, as well as many employer-sponsored plans, meet these comprehensive standards, effectively defining the modern concept of major medical coverage.