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A. Types of Plans

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Educational Objective
  • III.A.1. Be able to identify the following types of medical expense plans: basic hospital, basic surgical, basic medical, comprehensive major medical, and supplemental major medical.

Medical expense insurance can be written on a basic or major medical basis. Basic plans provide first-dollar coverage for specific, narrowly defined expenses, while major medical plans provide much broader coverage subject to a deductible and coinsurance.

1. Basic Hospital Expense Coverage

Basic hospital expense coverage pays benefits toward the cost of a hospital room, board, and other miscellaneous hospital charges incurred while the insured is confined as an inpatient. Room and board is typically paid up to a specified daily amount for a maximum number of days, and miscellaneous hospital expenses (such as x-rays, lab work, and medications administered during the stay) are paid up to a separate maximum, often expressed as a multiple of the daily room-and-board benefit.

Room and Board Example

A policy that pays a $600 daily room-and-board benefit for up to 90 days will pay a maximum of $54,000 toward room and board for a single hospital stay, regardless of the hospital's actual charge per day.

2. Basic Surgical Expense Coverage

Basic surgical expense coverage pays benefits toward a surgeon's fee for an operation, whether performed in the hospital or on an outpatient basis. Benefits are usually paid according to a surgical schedule, a list of covered operations with a maximum dollar benefit assigned to each procedure based on its relative severity and complexity.

Surgical Schedule Example

A surgical schedule might list a maximum benefit of $2,000 for an appendectomy and $5,000 for open-heart surgery, reflecting the difference in complexity between the two procedures.

3. Basic Medical Expense Coverage

Basic medical expense coverage (sometimes called "regular medical") pays for nonsurgical physician fees, such as visits to a physician while hospitalized, up to a specified daily maximum for a limited number of days. It is often sold together with basic hospital and basic surgical coverage as a package.

4. Comprehensive Major Medical

Comprehensive major medical insurance combines basic hospital, surgical, and medical coverage with major medical coverage into a single policy, eliminating the need for separate basic plans. It provides broad protection for nearly all types of medical expenses, subject to a relatively low deductible and coinsurance, and features a high overall maximum limit.

5. Supplemental Major Medical

Supplemental major medical is designed to work alongside an existing basic plan, picking up where the basic plan's benefits end. It typically uses a corridor deductible — a gap between the point where basic coverage stops paying and the point where the supplemental coverage begins — during which the insured is responsible for expenses out of pocket.

Know This

Comprehensive major medical combines basic and major medical coverage in one policy; supplemental major medical adds on top of an existing basic plan.