Types of Major Medical Coverage

Most employees have some type of major medical expense coverage that protects against catastrophic medical expenses, with few exclusions or limitations. However, employees must often pay part of the cost of these medical expenses because of deductibles and coinsurance provisions.

Types of Major Medical Coverage
There are two general types of plans for providing major medical coverage—supplemental (or superimposed) plans and comprehensive plans. Supplemental plans coordinate major medical coverage with various basic medical expense coverages. Figure 1 shows one example of such a plan.



Subject to its own limitations and exclusions, a supplemental major medical plan covers the following expenses:

Expenses not within the scope of the basic coverages. For example, benefits for office visits to a physician may be included if the basic coverages provide benefits only for in-hospital visits.

Expenses no longer covered under the basic coverages because those benefits have been exhausted. For example, if the basic coverages provide room-and-board benefits in full, but only for a maximum of 60 days, the major medical plan covers the cost of room and board beginning on the 61st day.

Expenses specifically excluded under the basic coverages. For example, if the basic coverages exclude hospital charges for the treatment of alcoholism, the major medical coverage may provide benefits. However, expenses that are excluded under the basic coverages are often excluded under the major medical plan.

In the comprehensive type of major medical coverage, a single major medical contract covers all medical expenses, as illustrated in Figure 2. In this example, once the deductible is satisfied, most medical expenses are covered subject to a coinsurance provision. Although Figure 2 shows a comprehensive major medical plan in its purest form, most comprehensive medical expense contracts contain modifications of the deductibles and/or coinsurance provisions for certain expenses, often resulting in payment of 100 percent of reasonable and customary charges.