It’s hard to predict when you may need healthcare services. You can get into an accident, develop a health condition or require immediate attention for another reason. Major medical insurance helps cover healthcare costs so you can focus on getting better. This guide will explore how major medical insurance works and what to know before choosing a provider.
Understanding Major Medical Insurance
Major medical insurance is a type of health insurance covered by your employer or the Affordable Care Act marketplace. You can also get these insurance policies from a licensed private broker. The policies offer financial protection from costs associated with urgent care, hospital care, surgeries, emergency room care and related healthcare expenses. These policies offer comprehensive coverage and aim to reduce your out-of-pocket costs.
How Does Major Medical Insurance Differ From Other Types of Health Insurance
Major medical insurance offers more coverage and a lengthier term than most health insurance policies. While the protections are greater, premiums are also higher for major medical insurance. Because the term is longer, you are stuck with the policy for longer, whether you like the terms or not.
Major medical insurance is more costly and inconvenient if you never file a claim. It also takes longer to start receiving coverage for major medical insurance compared to other types of health insurance, but the policies have no dollar limits on coverage. If the medical procedures get very expensive, major medical insurance may be the better choice.
Many short-term coverage plans have limits on how much they will cover. Once you exceed the coverage limit, you must pay the rest of the expenses out of pocket.
What Does Major Medical Insurance Cover?
Major medical insurance offers more coverage than most health insurance policies. It’s a case of getting what you pay for, but you should consider how premiums will affect your monthly budget before committing to a policy.
- Hospital care
- Urgent care
- Surgery
- Maternity care
- Newborn care
- Preventative care
- Labs and tests
- Prescription drugs
- Pediatric care
- Mental health
- Emergency room care and services
- Outpatient care
Types of Major Medical Insurance
Major medical insurance offers the most protection, and you can choose from several types of policies. Each of these types of health insurance has different eligibility requirements, premiums and terms.
Employer-Sponsored Health Insurance
An employer-sponsored health insurance plan is one of the best ways to get insured. Many employers incentivize potential employees with complementary health plans. The employer handles the premium payments, and you get health insurance for the length of your employment.
COBRA
The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows people to continue their health insurance coverage even if they get laid off. Anyone with COBRA health insurance will pay the premiums instead of the employer, plus a 2% service fee. The higher premiums can come as a shock for many consumers, but it is possible to save on your health insurance. You will still have a higher monthly premium, but any effort to reduce your premium will free up extra space in your budget.
ACA Marketplace Health Insurance
The Affordable Care Act Marketplace offers plenty of coverage but still comes with high premiums. People may qualify for lower premiums or free health insurance through ACA based on their family size and income.
Medicare
Medicare is federal health insurance for people who are 65 or older. This type of insurance also applies to some younger people who have disabilities or end-stage renal disease. Medicare offers hospital insurance, medical insurance and prescription drug coverage. Medicare offers much lower monthly premiums, and people who have paid the medicare tax for at least 10 years pay no monthly premiums.
Medicaid
Medicaid is another federal policy that offers free or low-cost health insurance to low-income adults and children. Medicaid can pay for your medical care from the last three months, even if you were previously not enrolled in Medicaid. The Children’s Health Insurance Program (CHIP) offers affordable health insurance for children of families who earn too much to qualify for Medicaid.
Student Health Plans
Some colleges and universities offer health plans for students seeking coverage. Many of these same institutions also require each student to have health insurance. Not every student needs to get a health plan from their college. Young adults can stay on one of their parent’s health plans until they turn 26.
Who Is Eligible for Major Medical Insurance?
Each type of major medical insurance policy has different requirements that revolve around income, family size, age and employment. Major medical insurers cannot reject applicants with a previous health condition. This is a distinction from short-term health insurers who can reject your application based on your previous health history.
What Is the Average Cost of Major Medical Insurance?
Major medical insurance premiums vary based on your location and family size. The type of plan — bronze, silver or gold — also impacts how much you pay each month for the premium.
KFF projects a high-net-worth 40-year-old single adult who doesn’t use tobacco will pay a $477 monthly premium for the silver plan and a $364 monthly premium for the bronze plan. Premiums get higher for gold and platinum plans.
The same 40-year-old with a spouse of the same age and two children will have to pay $1,525 per month for the silver plan’s premium. The bronze plan comes to $1,055 per month.
The premiums can be lower if you are eligible for financial help. Both calculations assume that the adults do not have coverage available at their jobs.
What Is a Deductible in Major Medical Insurance?
A deductible is the amount of cash you have to pay out of pocket before the health insurance policy kicks in. If a procedure costs $50,000, and you have a $10,000 deductible, you must first pay $10,000 before the health insurance provider covers the rest. Issuers will help you cover the remaining $40,000, but a copay will be involved. It’s an additional expense that varies for each insurance provider.
Choosing the Right Major Medical Insurance
Major medical insurance offers several financial safeguards that make healthcare costs more manageable. Each policy has different premiums, terms and coverage. Knowing what you want from your policy and how much you can afford each month will help you make a better decision.
Frequently Asked Questions
Is major medical insurance mandatory?
Major medical insurance is not required at the federal level, but some states require it.
Are preexisting conditions covered under major medical insurance?
Preexisting conditions are covered under major medical insurance.
Are there any restrictions or limitations with major medical insurance?
There are no restrictions or limitations with major medical insurance. Insurers will continue to cover your healthcare bills regardless of how high they go.
About Marc Guberti
Marc Guberti is an insurance writer passionate about helping people learn more about money management, investing and finance. He has more than 10 years of writing experience focused on finance and digital marketing. His work has been published in U.S. News & World Report, USA Today, InvestorPlace and other publications.