Major Medical Policies
MR. WATSON: Major medical expense policies are what most people are familiar with. They cover just about everything. They have
- deductibles (the amount the insured MUST pay first)
- coinsurance. (insured & company share the expense)
Coinsurance is percentage participation. It is a sharing of the expenses. After the insured has satisfied the deductible, the insurance company pays a high per centage of the claim, usually 75 or 80% of the claim. Co-insurance is NOT the same thing as a "co-pay". Remember, the "co-pay" is found in an HMO and it is the amount the subscriber must pay for the office visit.
MR. WATSON: What's the purpose of a deductible?
MAN: Keep the premiums down. The higher the deductible the lower the premium. The lower the deductible the higher the premium.
MR. WATSON: Y'all got it? The Basic plan keeps it premiums down by limiting benefits.
MR. WATSON: Now, the services and supplies covered under a major medical policy must be performed or prescribed by a licensed physician and necessary for the treatment. So it doesn't cover cosmetic surgery.
MR. WATSON: There are two different types of Major Medical policies:
- Supplementary Major Medical (two plans, Major Medical & Basic plan)
- Comprehensive Major Medical (one plan)
MR. WATSON: A supplementary major medical supplements a basic plan. You have two plans, a Basic Plan and a Major Medical. The basic plan pays first, and then, after the Basic Plan has paid all it will pay, the major medical kicks in.
MR. WATSON: A comprehensive major medical is a stand-alone plan. It doesn't supplement anything. It is a stand-alone plan, one plan.
MR. WATSON: Guys, there are three types of deductibles to choose from:
- flat
- corridor
- integrated
MR. WATSON: Let's start with a policy that has a flat deductible . It's found in a comprehensive, stand-alone plan. Let's say I have $100,100 of hospital expenses. We have a deductible of $100. It's an 80-20 plan. The most common types of co-insurance are-
ALL: 80/20, 75/25.
MR. WATSON: Very good. Now, first thing that happens is what? The insured pays the deductible. $100 deductible. They are left with $100,000 of hospital expenses. The insurance company pays $80,000 or 80 percent, and the insured pays $20,000 or 20 percent. The total out-of-pocket expense is $20,100, $20,000 plus the $100 of the deductible. This is a comprehensive major medical plan. The deductible is paid first. It's like the button on the umbrella. It opens up and they pay the 80 percent. Make sense?
ALL: Yes.
MR. WATSON: That's a flat deductible.
