Major Medical Health Insurance Overview

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Major medical health insurance is a type of health insurance that covers the expenses associated with serious illness or hospitalization. 

Major medical health insurance is the terminology that was historically used to describe comprehensive health plans that covered most necessary care. Once the Affordable Care Act was implemented, the term "minimum essential coverage" was frequently used instead, although they're not entirely interchangeable.

Minimum essential coverage is what you have to have in order to avoid the ACA's penalty for being uninsured, and with the exception of short-term health insurance (discussed below), all major medical health insurance plans count as minimum essential coverage (the penalty for being uninsured will be eliminated after the end of 2018, although there's still a penalty that applies if you're uninsured in 2018—it will be assessed on 2018 tax returns that are filed in 2019).

"Real" Health Insurance

Major medical health insurance in layman's terms is what people would generally consider "real" health insurance. It does not include limited benefit plans, fixed indemnity plans, dental/vision plans, accident supplements, or critical illness plans, none of which are regulated by the Affordable Care Act.

Major medical plans usually have a set amount, or deductible, which the patient is responsible for paying. Once that deductible is paid, the plan typically covers most of the remaining cost of care, subject to co-insurance paid by the patient. Many major plans also have co-pays for some services.

Most major medical plans will also cap your out-of-pocket exposure for in-network services. In 2018, all ACA-compliant plans must cap in-network out-of-pocket costs (for essential health benefits) at no more than $7,350 for an individual and $14,700 for a family. In 2019, this upper limit on out-of-pocket costs rose to $7,900 for an individual and $15,800 for a family.

Major medical plans that are not ACA-compliant (ie, grandmothered and grandfathered plans) can have higher out-of-pocket limits, but it would be highly unusual for even these plans to have unlimited out-of-pocket costs (note that traditional Medicare, without a Medigap supplement, does not have a cap on out-of-pocket costs, but this is not the model that private insurance typically follows).

Major medical plans can be very robust, with low out-of-pocket costs, but they also include high deductible health plans that are HSA-compliant, and catastrophic plans as defined by the ACA.

Major Medical Versus Plans That Aren't Major Medical Coverage

There's no official definition for major medical coverage. But it's generally accepted that plans that are minimum essential coverage (which is defined) are providing major medical coverage.

But even so, there are no hard-and-fast rules that apply to minimum essential coverage, in terms of what has to be covered by the plan. ACA-compliant plans are much more clearly defined, but ACA-compliant plans are just one subset of minimum essential coverage (and of major medical coverage).

Specifically, grandfathered and grandmothered health plans are major medical coverage and are minimum essential coverage, but they aren't required to cover all of the things that ACA-compliant plans are required to cover.

And even for ACA-compliant plans, the rules are different for large group plans versus individual and small group plans. Large group plans, for example, aren't required to cover the ACA's essential health benefits, while individual and small group plans are. But they all count as minimum essential coverage and are considered major medical coverage.

Things like limited benefit plans, fixed indemnity plans, accident supplements, dental/vision plans, and critical illness plans, on the other hand, are very different. They are generally designed to supplement a major medical plan, rather than serve as a person's primary coverage. So they'll help to cover some of the out-of-pocket costs that a person might incur with a major medical plan, or provide some coverage for things that aren't covered under major medical plans, like dental and vision care, or some of the costs associated with having to travel to a distant location for medical treatment. But a person relying entirely on one of those plans—without a major medical plan in place—would be woefully underinsured in the event of a serious illness in injury.

The premiums for excepted benefit plans tend to be much lower than major medical premiums, but that's because they're covering so much less (keep in mind that the ACA's premium subsidies make major medical coverage much more affordable, for millions of people, than it would be if they had to pay full price).

Some States Consider Short-Term Health Plans Major Medical Coverage

Short-term health insurance is also not regulated by the ACA and is considered an excepted benefit. But it differs from the other excepted benefits in that some states apply their individual major medical insurance laws to short-term plans (some, however, explicitly differentiate between major medical coverage and short-term coverage). While short-term health insurance is considered major medical coverage by some state regulators and is sometimes referred to as "short-term major medical," it is never considered minimum essential coverage.

Short-term health insurance plans are the closest thing to "real" health insurance among the excepted benefits. They're similar in many ways to the grandfathered and grandmothered major medical plans that were sold before the ACA was enacted and implemented, and they're still available for sale today (unlike grandfathered and grandmothered plans, which have not been sold since 2010 and 2013, respectively). The Trump Administration has recently relaxed the rules for short-term plans; as of October 2018, short-term plans can have initial terms of up to 364 days, and total duration, including renewals, of up to 36 months (states can impose stricter rules, and many have done so).

When a short-term plan can potentially last for up to 36 months and is comparable to some of the grandfathered and grandmothered health plans that are still in force, it's easy to see how it can be considered major medical coverage. But the rest of the excepted benefits are never considered major medical coverage.

Where Can You Get Major Medical Coverage?

The coverage you get from your employer is probably major medical health insurance. If you work for a large employer, they have to offer coverage that provides minimum value in order to comply with the ACA's employer mandate. A plan that provides minimum value will generally also be considered major medical coverage, as it will be fairly comprehensive.

Any plan you buy in the exchange in your state will be considered major medical coverage. Off-exchange plans (purchased directly from an insurer, instead of from the health insurance exchange in your state) are also major medical plans, as long as they're fully compliant with the ACA. All new major medical plans have to be ACA-compliant since 2014, including those sold outside the exchanges. But supplemental coverage, limited benefit plans, and short-term plans can still be sold outside the exchanges; these plans are not regulated by the ACA and are not considered major medical coverage.

If you buy coverage in the exchange in your state, you may be eligible for premium subsidies to offset the cost of purchasing major medical coverage. For 2018, subsidy eligibility for a family of four extended to household incomes as high as $98,400, and in 2019, a family of four will be subsidy-eligible with an income as high as $100,400 (eligibility is capped at 400 percent of the poverty level; this chart shows what that amounts to in dollars for various family sizes; on the low end, subsidies aren't available if your income is below the poverty level, or if you're eligible for Medicaid). 

Medicare and most Medicaid plans also count as minimum essential coverage, and can thus be considered major medical plans (some people qualify for limited-benefit Medicaid coverage—Medicaid that only covers pregnancy-related services, for example—and this would not be considered minimum essential coverage or major medical coverage).

Grandmothered and grandfathered health plans count as major medical coverage, although they can no longer be purchased. But if you still have coverage under these plans, you've got minimum essential coverage (and major medical coverage), and are not subject to the ACA penalty. Grandfathered plans can remain in force indefinitely, as long as they're not substantially changed. Grandmothered plans can remain in place until as late as December 31, 2019, at the discretion of states and insurers.

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