Medical Expense Insurance

MR. WATSON: Guys, I want you to ask yourself two questions throughout this chapter. If you can answer these questions, then you'll know this chapter, inside and out. If you can't answer these questions, you are really going to struggle. Constantly ask yourself these two questions, and you'll be all right.

1. What do these policies cover, specifically?
2. How do they pay the benefits?

MR. WATSON: Every policy you go over in here, make sure you can answer those two questions. Because there are policies in here you will think, why would anybody want this garbage? They don't ask you that on the exam because that doesn't matter, okay? So you just need to know how to answer those two questions and don't worry about the rest. Here we go. A very important chapter.

The purpose of medical expense insurance

MR. WATSON: Guys, honestly, medical expense insurance is insurance that covers your medical expenses. That was deep.

MR. WATSON: The extent a given medical expense policy covers medical care, the specific types of services and treatments covered, and the benefits provided depends upon the policy. Generally speaking, medical expense insurance is available through one of two different policy plans:

1. Basic medical expense policy
2. Major medical expense policy

MR. WATSON: On the surface, which one would you rather have?

ALL: Major medical.

MR. WATSON: Of course, major medical. Basic medical expense policies limit coverage to select types of medical care. Major medical, which can work either as a supplement to the basic plan (two plans) or as an extensive stand-alone plan (one plan) provides more complete coverage. Does that make sense?

ALL: Yes.

MR. WATSON: Medical expense plans pay their benefits on a

1. Reimbursement approach or
2. A fixed rate approach.

A reimbursement approach means if I'm out $500,000 because of hospital bills and doctor bills, they're going to reimburse me $500,000. A fixed rate approach pays a fixed dollar amount per day regardless of the actual charges incurred.

MR. WATSON: Example: Let's say we've got a guy named Carl. Carl owns a reimbursement type policy that will reimburse him up to $10,000. He goes into the hospital for ten days and he incurs expenses of $10,000. His policy will reimburse him how much?

ALL: $10,000.

MR. WATSON: That's the reimbursement approach.

MR. WATSON: Now, Ronnie has a fixed rate policy that will pay her $100 a day for every day she's confined to the hospital as an inpatient. She goes in the hospital for the same amount of time as the other guy, 10 days. Incurs the same amount of expenses as he did, $10,000, but her policy will only pay her a hundred dollars a day multiplied by the ten days. Does that make sense?

ALL: Yes.

MR. WATSON: Medical expense policies that pay a fixed rate approach provide the insured with a stated benefit amount for each day he's confined to the hospital as an inpatient. The money can be used for whatever purposes he wants. Everybody all right?

ALL: Yes.