Difference Between Basic Insurance & Major Medical Insurance

Despite the fact that the terms basic insurance and major medical insurance may seem very similar, there is a big difference in the products. One can be used for claims involving smaller things, including doctor's office visits, and the other is only good for things like hospitalization. Despite this and other differences, both are considered to be some of the most affordable policies on the market, but may not fit the needs of all families.

Benefits

• The biggest contrast between basic medical insurance and major medical insurance comes in the consideration of benefits. Basic insurance pays a predetermined amount no matter what the actual costs based on the situation. For example, the amount paid for doctor's visits may be one amount and the amount paid for hospitalization will likely be a different amount, but that is the only amount that will be paid regardless of actual charges. Major medical is for catastrophic illness, including surgery and cancer.

Deductibles

• Costs for a basic plan are predetermined and there is typically no deductible for a basic insurance plan, though every plan is different. A deductible may be enforced for a hospitalization. In a major medical plan, the deductible is often very high, but set by the policyholder. It is not uncommon to see deductibles as high as $5,000 and even higher for a major medical plan.

Premiums

• The major point a basic health insurance plan and a major medical insurance plan have in common is the discounted premiums. For those on a budget, or who have a health savings account, this may be all they need. The premiums are often much lower than traditional insurance product. If purchased through a group plan, the savings can be even greater. However, for those with persistent health problems, the out-of-pocket expenses can far exceed the premium savings.

Lifetime Maximums

• In the past, coverage limits typically did not exist with a basic medical plan. With a major medical insurance plan, lifetime maximums were typically $5 million or more, depending on the policy. However, in the U.S., with the new health care reform law, lifetime maximums are no longer allowed for insurance policies. This provision went into effect in September 2010.

Supplemental Option

• Typically, a basic health insurance plan or a major medical plan are used in conjunction with some other type of health plan strategy. This strategy could include health savings accounts or more traditional insurance plans provided through an employer or paid entirely by the individual. However, young and healthy individuals may choose either of these plans as their sole source of health insurance for a certain period of time.