Major Medical Health Insurance Plan

If you don't have health insurance through your employer, or are looking for a way to save money on your coverage, a major medical health insurance plan may be an option. Sometimes also called a catastrophic plan or high deductible health plan, these plans are designed to have lower monthly premiums in exchange for higher deductibles or restrictions in coverage.

Major Medical Plans Explained

Typically, a major medical health insurance plan covers a hospital stay for serious illness or surgery as well as the associated tests and procedures. Doctor visits and prescriptions are paid for by the insured. Most only pay medical expenses after a certain deductible amount has been met, while the insured pays out-of-pocket for all expenses up to that point, even for covered procedures. For example, if you have a $5,000 deductible, and you have surgery that costs $10,000, you would pay the first $5,000 of the bill and the insurance would pay for the remainder.

Some plans do provide for routine preventive care, such as yearly physicals, but with other plans it will be necessary to make other arrangements for prescription drugs, dental or vision coverage. In some cases, a major medical plan may be sold along with a more comprehensive health plan that covers basics like routine doctor visits or minor illnesses and injuries.

Most major medical plans do not cover such elective surgeries as cosmetic or bariatric surgery. Hormone therapy and infertility treatments are not covered, and there may be a waiting period before a pregnancy is covered.

Health Savings Accounts

The Internal Revenue Service allows people with some high deductible plans to open a Health Savings Account (HSA), which can be a good option for people who need to set aside additional funds for medical expenses. Money you contribute to an HSA is tax-free, and remains tax-free when it is withdrawn as long as it is used for qualified medical expenses. HSAs can also be carried over from year to year, or taken with you when you change jobs. Check with your insurance provider to determine if your policy qualifies under IRS guidelines.

Who Should Consider Buying a Major Medical Health Insurance Plan?

There are several questions to ask before choosing a catastrophic plan over a more comprehensive health plan:

• Do you get sick often, or suffer from any chronic conditions?
• Do you take regular prescriptions or need medical supplies regularly?
• Can you afford to pay out-of-pocket for your medical care?

A catastrophic plan may be a poor choice for someone who see the doctor often, or who have some chronic medical conditions. In fact, people with some pre-existing conditions such as heart disease, emphysema, diabetes, or HIV may not qualify for these plans at all. Even if the plan does not exclude your condition, the high deductible would need to be paid before your medicine or supplies would be covered. In that situation, the higher premiums from a traditional plan may be more cost-effective in the long run.

You will also need to consider not only whether you would be able to pay your own expenses until you've met your deductible, but whether you could pay that deductible at a moment's notice. It may sound reasonable to think of paying $5,000 out of pocket over the course of a calendar year, but what if you have an accident or get seriously ill at the beginning of the year? The full deductible still must be paid before the insurance policy begins to cover expenses.

Generally, major medical health insurance plans works best for healthy adults who seldom visit a doctor and take few prescriptions. If you fit this description, a major medical health insurance plan may be the right choice for you.