Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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The lowdown...

  • Covers most medical expenses, including prescription drugs
  • Usually, has high deductible, but lower premiums
  • Good option for those generally healthy and trying to save on premiums
  • Covers large expenses that other plans may not

A major medical policy is designed to cover large medical expenses due to a severe illness, extended hospital stay, or major injury. It is sometimes also referred to as “comprehensive” medical insurance or catastrophic coverage.

Major medical policies can be standalone coverage or used as a supplement for basic health care policies. They vary greatly, and this article will cover the basic features common to the majority.

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A Brief Note Regarding Major Medical and the Affordable Care Act (ACA)

The ACA refers to all its approved plans as “major medical plans.” This tends to cause a great deal of confusion. This article discusses the definition and features of a “true” major medical policy.

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Terms Used in Major Medical Policies


To understand major medical policies and how they function, there are a few key terms you need to know.


A deductible is an amount you must pay out of pocket before an insurance coverage begins to pay anything. Most major medical plans have some type of deductible. If it is $1,000, then you must incur that much in expenses before the plan will begin to pay you.


Coinsurance is the percentage that you may be required to pay for services after the plan begins to cover expenses. Most major medical plans have a coinsurance of 20 percent, though 25 percent is also encountered from time to time.

This means the plan will cover 80 percent of a bill; you must pay the remaining amount. For example, if a bill were $150, and the deductible has been satisfied, the plan would pay $120 and the remaining $30 would be your responsibility.

Out-of-Pocket Maximum or Limit

An out-of-pocket maximum or limit is the upper limit of covered services for one year. Once you spend this amount on the combined amount of deductibles, coinsurance, and copayments, the major medical plan will then pay 100 percent of all covered benefits. These limits, sometimes known as “disappearing coinsurance,” vary widely from plan to plan.

Lifetime Maximum or Limit

A lifetime maximum or limit is the maximum amount of total lifetime benefits you can receive from your major medical policy. This may be a dollar amount, such as $1 million, or a cap on specifics benefits. For example, a plan might state they will only ever cover one organ transplant. Most, but not all, major medical plans have some time of lifetime maximum.

How a Major Medical Policy Works


Major medical policies are usually very straightforward. After the deductible is met, the plan typically pays a percentage of all covered expenses. The examples in this article will use 80 percent since that is the most common.

To demonstrate this, let’s say you have a major medical policy with a $3,000 deductible. You find yourself in the hospital with pneumonia for a week and incur a $9,000 bill.

You would pay the first $3,000. Once the deductible is satisfied, the major medical policy will begin to pay. Of the $6,000 remaining, the policy will pay $4,800, leaving $1,200 coinsurance. Your total out of pocket would then be $4,200.

If enough expenses are submitted that the out-of-pocket limit is reached, the plan begins to pay 100 percent of covered expenses. It is important to understand that the out-of-pocket limit is not the amount of expenses submitted to the insurance company; rather it is the amount that the patient has paid out of pocket.

For our second example, let’s go back to that same hospital stay, but make it two weeks. Instead of a $9,000 bill, you are now faced with a $25,000 bill. In this example, we will use a $5,000 out of pocket maximum.

Subtract the $3,000 deductible. This leaves $22,000. Eighty percent of that is $17,600, leaving a coinsurance of $4,400. The out of pocket maximum is $5,000, so instead of having a payment of $7,400, this is now cut to $5,000, with the insurance picking up the other $2,400.

This still may seem like a fair amount of money, but there are two important points to remember: The first is that any bills the rest of the year are then covered at 100 percent. Second, for a truly major illness, bills can easily escalate to hundreds of thousands of dollars.

Lifetime maximums normally come into play with a dire situation such as cancer or an organ transplant. They can vary greatly from policy to policy, so make sure you know that figure before you decide upon a policy.

It is also important to understand these maximums do not reset every calendar year like deductibles, coinsurance, and out of pocket maximums.

They accumulate every year, so if you have a policy for a long time and use it heavily, this can put a major dent in your lifetime maximum. Once that amount is reached, the policy is effectively over.

What Major Medical Policies Cover


Most major medical policies cover a wide range of services and products. There is some variation in coverage between policies, but these are the major points of coverage:

  • Inpatient hospital charges including room and board, medications and general nursing care
  • Inpatient medical and surgical charges
  • Outpatient physician visits
  • Preventive services and immunizations
  • Ambulatory and outpatient surgery and anesthesia
  • Inpatient and outpatient radiology and laboratory tests
  • Private duty nursing
  • Ambulance services (if medically necessary, not for routine transport)
  • Prescription drugs (both oral and intravenously administered)
  • Chemotherapy and radiation therapy
  • Blood workups and transfusions
  • Oxygen
  • Durable medical equipment
  • Home health care
  • Prosthetics
  • Dental services (if there is an injury to the mouth or natural teeth)
  • Other medical practitioners’ services (varies by policy)

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Services Normally NOT Covered by Major Medical


Major medical plans generally follow Medicare’s guidelines regarding non-covered services. Non-covered services are often referred to as ”policy exclusions.” Some of the usual exclusions include the following:

  • Routine dental care such as cleanings, fillings, and x-rays
  • Routine eye exams, prescription glasses and contact lenses
  • Cosmetic surgery
  • Acupuncture
  • Hearing aids
  • Routine foot care
  • Dentures
  • Long-term care
  • Infertility treatments

This is by no means a complete list, so make sure to read the policy exclusion list carefully when shopping for major medical insurance.

Pros and Cons of a Major Medical Plan


Major medical plans are not for everyone. These are some of the factors you should consider while deciding if one is right for you.


  • Covers most medical expenses
  • Lower premiums
  • Emergency coverage
  • High lifetime maximum limits
  • Preventive coverage now included


  • High deductibles
  • Significant out-of-pocket costs
  • Some plans have very limited coverage

Cost of a Major Medical Plan


The costs of major medical plans vary greatly depending upon a host of factors such as deductible, the coverage offered, and the lifetime maximum of the policy.

It is also important to note that some major medical plans are only offered as short-term medical policies, so make sure you are not comparing apples to oranges.

As of September 2016, these were the nationwide averages.


  • $321 per month for individual coverage
  • $833 for family coverage


  • $4,358 per year for individual coverage
  • $7,983 per year for family coverage

These numbers may change significantly in 2017. This article was written as the new Affordable Care Act premium adjustments were being announced.

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There are a wide variety of major medical plans available in every state. Coverage can vary greatly, so if you are considering a major medical plan, it is best to take the time and do your homework.

Consider the financial impact a very high deductible might have on your life if you have a major illness. Is it worth the lower premium?

Also, make sure to look at two factors many people overlook: the out-of-pocket maximum and the lifetime maximum.

Other factors to consider are the types of services a plan might exclude. Perhaps you frequent a chiropractor and they are not covered. Do they exclude certain types of surgery? Are there limits that you find unacceptable? This is where taking the time to thoroughly read and understand a policy before you sign anything will pay off in the long run.

In conclusion, while there is no one-size-fits-all major medical policy, the variety available should provide the right one for you if this the coverage you choose.

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