United States
Hong KongMedical expense insurance: basic, major medical and what came after
Basic policies pay first dollar up to low limits with no deductible and cover one thing each. Major medical adds a deductible and coinsurance, covers a broad range of services and carries a high maximum. The eight sub-items under this heading are the largest cluster in section V.
This heading carries eight sub-items in a section worth 16 questions, which makes it the densest patch of the health half. It also runs historically: basic policies came first, major medical answered their weakness, and managed care answered major medical's.
Basic policies
Three separate contracts, each covering one thing, each paying from the first dollar with no deductible and each running out quickly.
| Policy | Covers | Typical limit |
|---|---|---|
| Basic hospital expense | Room and board and hospital services | A daily room rate for a maximum number of days |
| Basic medical expense | Non-surgical physician visits, in hospital | A per visit amount and a visit maximum |
| Basic surgical expense | Surgeon's fees | A schedule of amounts by procedure |
First dollar coverage sounds generous and is the weakness. There is no deductible, so the policy pays from the start, and the limits are low enough that a serious illness exhausts them almost immediately. Basic coverage protects against small bills and leaves the insured exposed to the large one.
Major medical, which fixed that
- A deductible, so small claims are the insured's problem.
- Coinsurance, so the insured retains a share of every claim above it.
- A broad range of covered services rather than one category.
- A high overall maximum, sometimes unlimited under current market forms.
- A stop-loss or out-of-pocket maximum, after which the plan pays in full.
That last bullet is the one candidates forget. It is also the one that makes coinsurance tolerable at all, because without a stop-loss a percentage share of a catastrophic claim is itself catastrophic, and a plan built that way would fail the person it was sold to.
Supplementary and comprehensive
Supplementary major medical sits on top of a basic plan and takes over when the basic limits are used up, with a corridor deductible separating the two layers so the insured absorbs something in between. Comprehensive major medical does the whole job in one contract. That is what a modern plan looks like.
Of the eight sub-items, three are managed care plans, three are accounts, and two are the basic and major medical categories above. So this heading is really three topics, and the two with their own pages here are the ones that carry the confusion.
An insured with a basic hospital and surgical plan and no other coverage has a long hospital stay followed by extended outpatient treatment. Where is she most exposed?
- The first dollar of the hospital bill, because of the deductible
- The outpatient treatment and anything beyond the basic limits
- The surgeon's fee, which basic plans exclude
- Nothing, since basic plans pay from the first dollar
Where it sits
- Section
- V, types of accident and health policies, 16 questions
- Listed as
- C. Medical expense insurance, eight sub-items
- Three of the eight
- HMO, PPO and POS plans
- Three more
- Flexible spending, health savings and health reimbursement accounts
- Our estimate for the heading
- 5 or 6 questions, ours and not published
Five or six of sixteen is our arithmetic on the sub-item count and not a Pearson figure. Even treated cautiously it makes this the heaviest heading in the heaviest section, which is a reasonable basis for deciding where an evening goes.
The opinion, and the concession
Basic policies are historical and the exam still tests them, so learn them as the thing major medical fixed rather than as products anyone is selling. The narrative order makes the features memorable: no deductible and low limits produced a policy that paid for the bills you could have afforded and stopped at the ones you could not. Every feature of major medical is a response to that sentence.
The concession: the market has changed faster than an exam outline can. Coverage requirements under federal law have reshaped what a medical expense policy looks like, and the outline handles that by listing the Affordable Care Act separately in the Texas portion. This page describes the categories as the outline frames them, which is what is examinable, not what a Texas broker is quoting this month.
Common questions
What is first dollar coverage?
Coverage with no deductible, so the policy pays from the very first dollar of a covered expense. Basic hospital, medical and surgical policies work this way. It sounds generous and is actually their weakness, because the limits are low and a serious claim exhausts them quickly.
What makes major medical different from a basic policy?
A deductible and coinsurance at the front, a broad range of covered services in the middle, and a high maximum at the back. It reverses the basic policy's design: the insured absorbs the small costs and the plan takes the large ones, which is what insurance is for.
What is a stop-loss provision?
A limit on the insured's own share. Once out-of-pocket costs reach the stated figure, the plan pays covered expenses in full for the rest of the period. Without it a percentage coinsurance share on a catastrophic claim would leave the insured with a catastrophic bill.
What is a corridor deductible?
The deductible that separates a basic plan from a supplementary major medical plan layered above it. The basic plan pays to its limits, the corridor deductible applies, and then the supplementary plan takes over. A comprehensive major medical policy avoids the arrangement by doing the whole job itself.