What Does Major Medical Insurance Mean?

If you are looking for health insurance on the individual market, or are trying to select the right plan for you and your family from a menu of employer-sponsored plans, you have likely come across major medical insurance. For many, major medical insurance is the most-cost effective health insurance choice. However, it usually does not provide the type of comprehensive coverage offered by other types of plans.

Identfication

• Major medical insurance is sometimes referred to as catastrophic health insurance because it is designed to protect you against severe financial hardship caused by serious illnesses or injuries. Major medical typically covers occurrences like hospital stays and surgeries. It may not cover smaller expenses like doctor visits and prescription drugs unless they are sold in conjunction with a comprehensive health care plan. Major medical plans typically feature high deductibles, which is the amount you pay out of pocket, to help keep premiums affordable.

Market

• Major medical plans are often attractive to young and healthy individuals who rarely go to the doctor but still want to guard against catastrophic medical expenses, as the premiums are often very low. Older individuals who are self-employed or do not have access to employer-sponsored health insurance may also choose a major medical plan to keep premiums as low as possible. People in their 50s may select a major medical plan to provide affordable coverage until they are eligible for Medicare.

Health Savings Accounts

• If you carry a major medical plan, combining it with a Health Savings Account can help you pay for smaller medical expenses while providing tax and savings benefits. With an HSA, you contribute to a savings account that you can access to pay for things like under-deductible expenses, doctor visits and prescription drugs. You can withdraw money with no tax penalty as long as you use it to pay for covered medical expenses. When you retire, you can use any accumulated funds to supplement your retirement income

Other Features

• In addition to the premium and deductible, there may be other costs associated with major medical insurance. After you have met your annual deductible limit, you may also be required to pay co-insurance, which is the percentage of the costs you share with your insurer. Once you have reached your out-of-pocket maximum, your insurance company typically pays the remainder of the costs. Some plans may also feature a co-payment, which is a fixed dollar amount you must pay for prescription drugs or doctor visits.