Kids and Health Care: Comprehensive Medical Expense Policies

Major Medical coverage is considered hospitalization insurance. It doesn't cover all medical expenses -- the way that traditional indemnity coverage does. What do you do about these other expenses? Paying for them out-of-pocket is the simplest option. But you need to be cash-rich to do this. So, most people will look for some kind of insurance to add on to their Major Medical.

In these situations, you may be faced with the prospect of buying a comprehensive medical expense plan. This kind of insurance adds separate coverage for basic -- and not necessarily hospital-related -- medical expenses to the Major Medical coverage.

This may seem like a long way to walk around the insurance block in order to get back to something like the traditional indemnity coverage we considered earlier. It is. The long walk is a testament to how convoluted insurance coverage can be.

The comprehensive plan consists of a block of first dollar benefits followed by a deductible and a typical Major Medical plan. This plan might specify that 100 percent of the first $5,000 or $10,000 of UCR expenses will be covered. Once this bundle of first dollar benefits is exhausted, you must satisfy a deductible (usually referred to as a corridor deductible) and then the Major Medical benefits kick in.

All of the provisions common to a basic plan as well as the provisions and concepts related to Major Medical plans, i.e., deductibles, co-insurance, stop loss, etc., are found in this type of plan.

The question raised by the comprehensive plan is whether or not you and your kids would be better off with this multi-part coverage or simply a "straight" Major Medical plan. More specifically: Does the block of first dollar benefits really enhance your overall protection?

To answer these questions, let's assume your son falls from a second-floor window of your house and has to have surgery for a ruptured spleen and spend a week in the hospital. The result is a $20,000 hospital bill -- that includes the surgery and related fees. Everything in the total is an undisputed UCR fee.

A straight Major Medical policy that includes a $1,000 deductible and 20 percent co-insurance will require you to pay $4,800 (the $1,000 deductible plus $3,800 in co-insurance). The policy will pay the hospital $15,200.

If you combine the Major Medical policy with basic medical coverage to create a comprehensive package, the basic coverage will cover all of the first $5,000 due the hospital. Then, you have to pay the $1,000 corridor deductible on the Major Medical plan, plus 20 percent of the balance: This means $3,800. The Major Medical policy pays the rest.

You've saved $1,000 by combining the coverages (and you've also saved $5,000 against the lifetime maximum benefit on your Major Medical policy). Following our logic from earlier in this chapter, if the comprehensive policy costs $1,250 or less, it's probably worth having.

In small claims situations, the extra premium for the comprehensive plan has to be weighed against the likelihood of a small claim of a few thousand dollars. Generally, this kind of calculation will make the comprehensive coverage look like a bad deal. But, with today's health care costs, it is difficult to spend a few days in a hospital, have surgery and not incur expenses exceeding $10,000.

Comprehensive plans vary, but generally cover the same kinds of services. Some of these include:

• professional services of doctors of medicine and osteopathy and other recognized medical practitioners;
• hospital charges for semiprivate room and board and other necessary services and supplies;
• surgical charges;
• services of registered nurses and, in some cases, licensed practical nurses;
• home health care;
• physical therapy;
• anesthetics and their administration;
• x-rays and diagnostic lab procedures;
• x-ray or radium treatment;
• oxygen and other gases and their administration;
• blood transfusions, including the cost of blood when charged;
• medicine requiring a prescription;
• specified ambulance services;
• rental of durable mechanical equipment required for therapeutic use;
• artificial limbs and other prosthetic appliances, except replacement of such appliances;
• casts, splints, braces and crutches; and
• rental of a wheelchair or hospital bed.