What Is Major Medical Health Insurance?

Major medical health insurance is a foundational type of coverage within the broader landscape of health insurance. It helps individuals and families manage the financial impact of significant medical events, ranging from serious illnesses to unexpected injuries.

Defining Major Medical Insurance

Major medical health insurance is designed to provide comprehensive coverage for substantial healthcare costs. This distinguishes it from more limited or supplemental insurance products that cover only specific services or offer fixed benefits. Its primary purpose is to safeguard policyholders from catastrophic medical expenses that could otherwise lead to severe financial hardship.

Historically, health insurance evolved from plans primarily covering hospital stays to more expansive policies. Major medical insurance emerged as the standard for comprehensive coverage, adapting over time to include a wider array of medical services. It represents the type of health insurance most people envision when discussing traditional coverage, aiming to cover a broad spectrum of medical needs rather than just isolated incidents.

Key Components of Coverage

Major medical insurance plans incorporate several financial mechanisms that define how policyholders share costs with their insurer. These mechanisms include deductibles, copayments, coinsurance, and out-of-pocket maximums.

A deductible is the initial amount a policyholder must pay for covered medical expenses before the insurance plan begins to contribute. For example, a plan might have a deductible ranging from a few hundred to several thousand dollars annually. Once this threshold is met, the insurance coverage for eligible services then activates.

Copayments are fixed amounts paid by the policyholder for specific services, such as a doctor’s office visit or a prescription drug. These are usually smaller, set fees, like $25 for a primary care visit. Copayments often apply even after the deductible has been met.

Coinsurance represents a percentage of the cost of covered services that the policyholder is responsible for after meeting the deductible. For instance, a plan might feature an 80/20 coinsurance arrangement, meaning the insurer pays 80% and the policyholder pays 20% of the cost. This cost-sharing continues until a specific financial limit is reached.

The out-of-pocket maximum is the most a policyholder will have to pay for covered medical expenses in a policy year. This limit includes deductibles, copayments, and coinsurance payments. Once this maximum is reached, the insurance plan typically covers 100% of all additional eligible medical costs for the remainder of the year.

Services Covered and Exclusions

Major medical health insurance plans typically cover a wide array of healthcare services, encompassing both routine care and significant medical needs. A central concept defining the scope of these plans, particularly in the contemporary market, is the inclusion of “Essential Health Benefits” (EHBs). These benefits are a set of ten categories of services that most individual and small group health insurance plans must cover:

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

For example, preventive care services like immunizations and certain screenings are often covered without cost-sharing.

While comprehensive, major medical plans do have boundaries regarding what they cover. Common exclusions generally include cosmetic procedures, experimental or investigational treatments, and services not considered medically necessary.

Major Medical in Today’s Healthcare Landscape

The Affordable Care Act (ACA) significantly shaped the definition and requirements for major medical health insurance. The ACA solidified what constitutes comprehensive coverage by mandating the inclusion of Essential Health Benefits and establishing limits on out-of-pocket costs. This legislation ensured that plans designated as major medical provide a standardized level of protection across various markets.

Major medical plans compliant with the ACA differ from other types of health coverage, such as short-term health insurance or limited-benefit plans. Unlike major medical policies, these alternative plans are generally not required to cover Essential Health Benefits, may not cover pre-existing conditions, and often have annual or lifetime limits on benefits. The ACA’s framework ensures that major medical insurance offers a robust and consistent safety net, distinguishing it from less comprehensive options in the market.