Major Medical Insurance
Major medical insurance plans come in
different varieties and options. Here are the
basics that should be considered.
You’ll pay a fee, or premium, to the insurance company to keep your health coverage. Premiums are
paid monthly, semi-annually, or annually. Most plans give a choice on the frequency of payments. You
may get a slight discount for paying your premiums annually. The plan you choose should have a monthly
premium that you can afford to pay.
Most major health insurance policies have other costs, in addition to the insurance premium. Deductibles
and copayments are other fees to consider.
The deductible, which is the amount you must pay out of pocket before the insurance will pay anything.
For example, if your deductible is $2,000, you’ll be responsible for the first $2,000 in medical expenses
each year. The insurance won’t pay any claims until that $2,000 has been paid. The deductible renews
every year. The $1,000 you paid last year, doesn’t apply to the deductible this year. Not every major
medical health insurance policy has a deductible, but generally those with higher deductibles have a
lower monthly premium.
The deductible should be an amount you can afford to pay out of pocket all at once if necessary. For
example, if you’re an accident, you’ll have to pay the full deductible immediately before the insurance
Co-Insurance and Co-Payments
The insurance provider may also require you to pay a certain portion of your health care costs. Co-
insurance payments are a percentage of health care costs. For example, you may be expected to pay
20% of the cost while the insurance provider pays the other 80%. Co-payments are a fixed dollar that you’
ll pay before the insurance pays. Co-insurance and co-payments are often due at the time you receive
medical services. If they’re not paid when you receive services, you’ll receive a bill from the medical
The out-of-pocket maximum puts a cap on the amount
you’ll have to pay out of pocket each year. Once you
reach the out-of-pocket limit, then the insurance pays
100% of all your health care expenses.
Maximum Coverage Amount
Some major medical insurance plans have limits on the
amount of coverage they’ll provide you. The lifetime
maximum is usually in the millions of dollars and is the
highest amount the insurance company will pay on your
behalf. If you reach your lifetime maximum, the insurance
provider will no longer pay any of your medical expenses.
You should look for at least a $1 million maximum to be
sure the insurance will last a lifetime. Higher lifetime maximums may be necessary if you have a serious
Types of Major Medical Insurance
There are a few types of major medical insurance policies.
An indemnity insurance plan lets you visit any medical provider. The insurance company pays their part
of the claim after you’ve met the deductible and paid any co-insurance or co-payments. If the medical
service provider charges more than what the insurance company considers to be customary, you’ll have
to pay the difference.
An HMO, or health management organization, plan requires you to receive all your health care from a
provider that’s in the organization’s network. You’ll be required to choose a primary care physician that
coordinates your health care. You can’t see any other doctor without first receiving a referral from your
With a PPO, preferred provider organization, plan there are preferred providers who offer services at
lower prices than those out of network, however, you’re not required to see an in-network provider. You
also do not have to choose a primary care physician. You may have to pay upfront and be reimbursed for
services you receive from out of network providers.
A POS or point-of-sale plan requires you to choose a primary care physician who coordinates your
health care, but you’re allowed to see out-of-network service providers. The insurance pays a smaller
percentage of charges from out-of-network providers and you’re responsible for the outstanding amount.
These major medical insurance plans all have varying premiums. You have to choose the one that’s best
for your medical needs.
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