Health Insurance

What is Major Medical Insurance?

What is Major Medical Insurance?

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Major medical insurance provides minimum essential coverage for illness, hospitalization and preventive health care. Individuals and families who do not have access to employer coverage can obtain qualified major medical plans via the Health Insurance Marketplace or through an insurance company or broker. Plan availability can vary based on where you live, and how you purchase your insurance may impact your premium costs.

What is major medical insurance?

The focus of major medical insurance is providing coverage for illness, hospitalization and preventive health care. Individual major medical health insurance plans comply with Affordable Care Act (ACA) regulations for qualifying coverage and are designed to help pay health-related costs for enrollees. These "qualified plans" provide what the ACA calls minimum essential coverage.

Major medical could be an ACA-qualified plan that you purchase yourself through the Health Insurance Marketplace or an insurance company, or coverage through an employer. Major medical plans can provide full coverage with low out-of-pocket costs, but they also can be Catastrophic and other high-deductible health plans as defined by the ACA.

Major medical does not include insurance programs like limited benefit plans, fixed indemnity plans, accident supplements or critical illness plans, none of which are regulated by the ACA.

What does major medical health insurance cover?

Major medical insurance provides coverage for illnesses and injuries, along with preventive care. The ACA requires all major medical plans to cover an extensive list of preventive services for three categories of insureds including adults, women and children. This includes services for immunizations and screenings.

Along with preventive services, all major medical plans must provide at least these 10 categories of essential health benefits:

  • Ambulatory patient services
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance use disorder services
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Laboratory services
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including oral and vision care

Some states or major medical insurance companies may add coverage such as dental, vision or medical management programs (to help with diabetic needs, for example). How your major medical plan covers these benefits will vary depending on the program you choose. For instance, your coinsurance and deductible amounts along with network restraints play a part in how much you pay.

Does major medical insurance allow for preexisting conditions?

ACA-compliant major medical insurance does cover preexisting conditions. Under current law, health insurance companies can’t refuse to cover you or charge you more due to a preexisting condition — that is, a health problem you had before the date that your new health coverage starts.

All marketplace plans must cover treatment for preexisting medical conditions . No insurance plan can reject you, charge extra or refuse to pay for essential health benefits for any condition you had before your coverage started. Once you are enrolled, the plan can’t deny you coverage or raise your rates based solely on your health.

Grandfathered plans — an exception to the preexisting conditions rule

The preexisting coverage rule does not apply to "grandfathered" individual health insurance policies. A grandfathered policy is one you bought for yourself or your family on or before March 23, 2010, through an insurance company, agent or broker, that is still active. These plans might not include some rights and protections included in the ACA, including coverage for preexisting conditions.

What types of major medical insurance plans are available?

There are several types of major medical insurance plans available to individuals and their families, and each is designed to meet different needs. With certain plan types (options sometimes referred to as managed care plans), you are encouraged to use a specific provider network for your care. Others pay more toward services received outside the plan’s provider network.

Some examples of ACA-qualified major medical insurance include:

  • Any health plan bought through the Health Insurance Marketplace
  • Individual health plans bought outside the Health Insurance Marketplace, if they meet the standards for qualified health plans
  • Coverage through an employer or a parent's plan
  • Most student health plans
  • Certain veterans coverage
The best health insurance plan will be the one that meets your financial and health care needs. Choosing the right health plan is a big decision, so it is important to review your options.

Standard major medical insurance

The following four plan types are accepted as ACA major medical coverage, as long as they provide the required benefits. They are accessible through the Health Insurance Marketplace, or off-exchange through an insurance company or broker. The plans are location-specific, so not all plans may be available in your area.

  • Exclusive provider organization (EPO): A managed care plan where services are covered only if you use doctors, specialists or hospitals in the plan’s network (except in an emergency).
  • Health maintenance organization (HMO): A type of health insurance plan that typically focuses on prevention and wellness. To help maintain costs, an HMO usually limits coverage to care from doctors who work for or contract with the HMO. It generally won't cover out-of-network care except in an emergency and may require you to live or work in its service area to be eligible.
  • Point of service (POS): A type of plan where you pay less if you use doctors, hospitals and other health care providers that belong to the plan’s network. POS plans require you to get a referral from your primary care doctor to see a specialist.
  • Preferred provider organization (PPO): A type of health plan where you pay less if you use providers in the plan’s network. You can use doctors, hospitals and providers outside of the network without a referral for an additional cost.

Depending on where you live, you may find any or all of these options available to you at each metal level — Bronze, Silver, Gold and Platinum.

Major medical Catastrophic health insurance

Another category of coverage, called major medical Catastrophic health insurance, is also available through the marketplace. These programs have low monthly premiums but the deductible — the amount you pay before your coverage kicks in — is very high. A Catastrophic plan may be a way to protect yourself from worst-case scenarios, like getting seriously sick or injured, but you’ll pay most routine medical costs yourself.

Who is eligible for a Catastrophic plan?

Anyone under age 30 may enroll in a Catastrophic plan through the online marketplace.

If you are 30 or older, you must qualify for a hardship or affordability exemption to enroll in a Catastrophic plan. The marketplace must confirm, based on the data you provide, that you cannot afford regular health coverage. You usually only qualify during the months of your hardship, plus the month before and the month after the hardship period. However, extensions may be granted for up to a full calendar year.

If you are eligible, the available Catastrophic programs will display when you compare plans in the marketplace.

What are the costs associated with Catastrophic plans?

The monthly premiums for a Catastrophic plan depend on the applicant's situation. Although the premiums are usually low, you can’t use a premium tax credit to further reduce your cost. Before you choose a Catastrophic plan, check to see if you qualify for a premium tax credit based on your income. If so, a Bronze or Silver plan might be a better value.

For 2020, the deductible for all Catastrophic plans was $8,150. After you meet the deductible, your insurance company pays for all covered services, with no copayment or coinsurance.

What does a Catastrophic plan cover?

Catastrophic plans cover the same essential health benefits as other marketplace plans. And, like other plans, Catastrophic plans cover certain preventive services at no cost. They also cover at least three primary care visits per year. These visits are not subject to the deductible.

How do I purchase major medical insurance?

If you need to buy major medical insurance on your own, you can apply through the Health Insurance Marketplace or your state insurance exchange. Or, you can work directly with an insurance broker or company to purchase an "off-exchange" plan. It is important to remember that while off-exchange major medical plans provide ACA-qualified coverage, they are not eligible for premium subsidies or cost-sharing subsidies. Check first to see if you qualify for either of these benefits before deciding where to purchase your health insurance.

To use the marketplace or an insurance exchange, you must live in the United States and be a citizen or a lawfully present resident. You must apply during an open enrollment period, which typically runs from Nov. 1 through Dec. 15 of a given year. You can apply under a special enrollment period if you have a qualifying life event, such as:

  • Losing health coverage
  • Moving
  • Getting married
  • Having a baby
  • Adopting a child

Levels of plans in the Health Insurance Marketplace include Bronze, Silver, Gold and Platinum. These "metal levels" are not related to the quality of care but are based on how you and your insurance plan share costs (what your insurance company pays versus what you pay in deductibles, coinsurance or copays). The marketplace will walk you through plans and prices and can provide cost estimates based on your income. You'll also find out whether you qualify for a premium or cost-sharing subsidy.

If you prefer to work directly with any of the major medical insurance companies, you can contact them through their respective websites or customer service or sales centers.

You may be able to work with a private company to enroll in insurance that does not fall into the category of major medical. Per the ACA, some examples of nonqualified products include:

  • Coverage only for vision or dental care
  • Workers' compensation
  • Coverage for a specific disease or condition
  • Plans that offer only discounts on medical services

These limited benefit plans are not regulated by the ACA and do not provide coverage for essential health benefits. So, they generally are not suitable as stand-alone health coverage but can be good add-ons to a major medical plan. Private, limited benefit plans are not required to cover preexisting conditions and may deny or adjust coverage based on an applicant's age or medical history.

Fixed indemnity plans

This type of medical insurance pays a preset amount on a per-period or per-incident basis, regardless of the total charges incurred. Plans might pay $200 upon hospital admission, for example, or $100 per day while a person is hospitalized. These plans may have annual and lifetime benefit limits and may have specific benefit limits per the type of service.

Accident supplement insurance

Also known as accident insurance, these policies reimburse you for accident or injury. The policies typically have benefit amounts ranging from $1,000 up to $10,000 or more. Most accident supplements have small deductibles.

Critical illness plans

A critical illness plan covers a specific disease or condition and pays you a lump sum following the diagnosis of a covered illness. Critical-illness plans cover conditions like cancer, organ transplant, heart attack, stroke, renal failure or paralysis. There is no coverage if you’re diagnosed with a disease that is not on the specific list for your plan, and the list of covered illnesses varies between plans.

Benefit amounts can range from $5,000 to $200,000 or more, and premiums are based on the benefit amount and the age of the applicant.

Short-term plans

These plans offer temporary coverage, generally for a period of 12 months or less. Short-term health insurance can be a good option if you find yourself in a transition such as moving or a job change. Short-term plans often exclude various types of care altogether (for example, prescription drugs, maternity care or mental health care), and they put a cap on the overall amount that the insurance company will pay for a person’s care.

Limited benefit plan summary

Limited benefit programs can work as temporary coverage or as an add-on to your major medical plan, but they are not intended for use as long-term, stand-alone insurance. You may want to consider these pros and cons of limited benefit plans as you work through your decision.

Pros

  • Can enroll any time of year
  • May provide coverage for things that aren't included in major medical plans, like vision care
  • Cover other health-related costs, such as travel to receive treatment at a distant location

Cons

  • Are not required to cover preexisting conditions
  • Cannot be used as primary coverage
  • Are not eligible for ACA premium subsidies or cost-sharing subsidies

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.