Hassle-Free Health Coverage: The Major Medical Approach to Health Care Introduction

Indemnity health insurance comes in several common variations. The variations are based on specific coverage limitations that change the traditional indemnity policy substantially-so that it becomes, for all purposes, a different kind of coverage.

The most common variation on indemnity health coverage is the major medical policy. This coverage focuses on hospitalization costs, rather than health care costs in general. And it uses deductibles and absolute dollar limits differently than traditional indemnity insurance.

Major medical can be sold on an individual and group basis-and is sold aggressively to both. It provides benefits up to a high limit for most types of medical expenses incurred, subject to a large deductible. The contract may contain limits on specific types of charges, like room and board, and a co-insurance clause.

These policies usually pay covered expenses whether an individual is in or out of the hospital. Another name for this coverage is a catastrophe policy.

Because it covers costs related to hospitalization and has high deductibles, major medical is usually an insurance company's favorite kind of health policy. It can work well for you-as a consumer- too. But you have to look at this coverage as one part of a larger approach to health care finance.

In other words, the major medical approach to hospitalization coverage is designed to provide you with protection against catastrophic expenses that are a genuine risk in today's world.

You need to think of major medical as an approach because there are a lot of expenses that the plans don't cover. And you're going to have to fund those expenses somehow-either with out-of-pocket payments or some kind of supplemental insurance. We'll consider the options in this chapter.