Do I Need Major Medical Insurance?
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Major medical insurance is a broad term that generally refers to health insurance plans that meet coverage requirements set by the Affordable Care Act (ACA) but may also include other types of plans that comprehensively cover health care services.
ACA-compliant plans are recommended for just about everyone and they are commonly available through your employer, a government-funded program, the federal Health Insurance Marketplace or your state’s equivalent exchange.
Keep reading for an overview of what major medical insurance usually covers and what options you may have for obtaining coverage.
What Is Major Medical Insurance?
Major medical insurance is a type of health insurance that provides comprehensive coverage for the most important types of health care needs including routine doctor’s appointments, hospital visits for the treatment of serious diseases and more. For the most part, this category of coverage comprises health plans that comply with regulations set by the ACA.
The overwhelming majority of health plans in the United States should qualify as major medical insurance. As of 2022, roughly 93% of people enrolled in individual health plans opted for plans that complied with the ACA’s requirements.
How Does Major Medical Insurance Work?
ACA-compliant health plans cover a minimum number of essential health benefits and also offer certain protections that may not be guaranteed by noncompliant plans. For example, ACA-compliant plans must provide coverage regardless of your gender or health status and set a limit on the amount of money you have to pay out of pocket for covered services through deductibles, copays and coinsurance.
Types of Major Medical Insurance
See below for an overview of the different types of health insurance coverage that may qualify as major medical insurance.
Depending on the state you live in, you can buy major medical insurance through either the federal government’s Health Insurance Marketplace at HealthCare.gov or your state’s equivalent website. One of the biggest benefits of shopping on the Marketplace is that you may qualify for tax credits based on your income, which can lower your health insurance premium.
Usually, you can only buy Marketplace insurance during open enrollment, which lasts from November 1 to January 15 in the majority of states. However, you may be able to sign up at some other point during the year if you qualify for a special enrollment period because of a qualifying life event that changes your health insurance needs, such as getting married or having a baby.
Private insurers may also offer health plans outside of the Health Insurance Marketplace year round. However, most off-Marketplace plans sold outside of open enrollment do not meet the ACA’s standards for qualifying health coverage and might not count as major medical insurance as a result.
The most common type of major medical insurance in the United States is employer-sponsored group health insurance, with 54.5% of Americans receiving coverage through a job-based plan for at least a portion of the year in 2022.
A major perk of employer-sponsored health insurance is that it can make coverage more affordable since your employer will generally pay the majority of your premium for you. As of March 2023, employers cover 80% of the premium for their employees’ individual health plans on average across the private sector and state and local governments.
Medicaid and CHIP
Medicaid and the Children’s Health Insurance Program (CHIP) are government-run programs that can offer health coverage to people who can’t afford Marketplace insurance. Medicaid provides free or low-cost insurance for low-income individuals and families, while CHIP provides low-cost insurance for children and sometimes pregnant women in households that make too much money to qualify for Medicaid. You can apply for coverage from these programs at any point during the year.
Meanwhile, Medicare is a government-funded program that can insure the elderly and others with chronic health conditions. Specifically, you may qualify for Medicare if you are at least 65 years old or if you have a disability, permanent kidney failure or Lou Gehrig’s disease.
There are four main parts of Medicare, which cover hospital care (Part A), outpatient medical services (Part B) and prescription drugs (Part D). Meanwhile, Medicare Advantage (Part C) typically includes all of the other parts and may also include extra coverage types such as vision insurance. Keep in mind that Medicare Parts A and C provide qualifying health coverage on their own but a standalone Part B or D plan would not.
Most people can first enroll in Medicare during their initial enrollment period, which is a seven-month time frame starting three months before the month they turn 65. Afterward, members can adjust their coverage during Medicare open enrollment from October 15 to December 7 or switch to a Part C plan during Medicare Advantage open enrollment from January 1 to March 31. Of course, members are also free to make changes to their coverage anytime they qualify for special enrollment periods.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a law that gives covered employees the option to stay on their employer-sponsored health plan for one and a half to three years after leaving their job, regardless of whether they quit or were fired.
You may be eligible for COBRA continuation coverage if the company you are leaving employs at least 20 workers during more than half of its typical business days, with part-time employees counting as a fraction of full-time employees based on the number of hours they work.
Note that the amount you have to pay for coverage will likely increase if you elect to receive COBRA insurance since your former employer can stop contributing toward your premium payments, leaving you to pay the full amount yourself.
Health Plans for Students
Many American universities offer ACA-compliant health plans to students. While your college may require you to maintain health insurance, you likely won’t have to purchase a plan through your school. Instead, you will generally have the option to buy your own Marketplace plan or stay on your parents’ health insurance as long as you are younger than 26.
Short-Term Health Insurance
There are mixed stances on whether short-term health insurance qualifies as major medical insurance. Some may say short-term plans count as major medical coverage because they can help you pay for multiple kinds of medical services. However, others may differentiate between major medical and short-term insurance since short-term plans do not have to comply with the ACA’s standards.
Other Major Medical Insurance Plans
There are numerous other types of health plans that provide qualifying health coverage and may count as major medical insurance including the following:
- Small Business Health Options Program (SHOP) coverage
- Peace Corps health insurance
- Some types of insurance offered by the Department of Veterans Affairs (VA)
- Grandfathered insurance plans you’ve had since before March 23, 2010
- Department of Defense Nonappropriated Fund Health Benefits Program (DoD NAF HBP)
- Refugee Medical Assistance (RMA)
- Some high-risk pool plans provided by state governments for policy years beginning on or before December 31, 2014
What Does Major Medical Insurance Cover?
All major medical insurance plans sold through the Health Insurance Marketplace are required to cover the following 10 essential health benefits:
- Outpatient care you receive without being admitted to a hospital
- Emergency services
- Overnight stays in a hospital
- Services related to pregnancy and newborn care
- Behavioral health treatment, counseling and psychotherapy related to a mental health or substance use disorder
- Prescription drugs
- Rehabilitative and habilitative devices and services
- Laboratory services
- Chronic disease management and preventive and wellness services
- Dental and vision insurance for children plus other pediatric services
While they aren’t officially classified as essential health benefits, birth control and services related to breastfeeding must also be covered by all ACA-compliant health plans. Some plans may also come with dental and vision insurance for adults but they aren’t required to, so you may have to buy these coverage types separately.
In addition, state governments are allowed to add their own essential health benefits that apply to all health plans in the state, which means you may be guaranteed even more coverage depending on where you live. For example, there are 23 states that require ACA-compliant health insurance companies to cover weight loss surgery.
What Isn’t Covered?
Coverage can vary from plan to plan but common exclusions you may encounter among major medical health plans include the following:
- Nonprescription drugs
- Cosmetic surgeries including LASIK
- Long-term care
- Travel vaccines
- Procedures involving new or experimental technologies
- Weight loss medication
How Much Does Major Medical Insurance Cost?
In 2022, the average cost of health insurance through an employer was around $659.25 per month for individuals and $1,871.92 per month for families. Meanwhile, most Medicare members will pay $174.70 per month for Part B and receive Part A for free in 2024, although you may have to pay up to $594 for Part B depending on your income and up to $505 for Part A depending on how long you or your spouse paid taxes into Medicare.
If you buy coverage through the Marketplace, then insurance carriers can only take these five factors into account when setting your premiums:
- Age: Older people may pay as much as three times more than younger people for comparable coverage.
- Location: Where you live can shape your health insurance prices due to factors like cost of living, health insurance laws and differences in competition, which can all vary from region to region.
- Tobacco use: Active smokers may have to pay up to 50% more for health insurance than people who don’t use any tobacco products.
- Number of people covered by the plan: You will naturally pay more for a family plan that covers your spouse and dependents than for an individual plan that only covers yourself.
- Category: Your prices may depend on your plan’s metal level, which is an indication of how the plan balances the share of costs between you and your insurance provider. Higher-tiered plans like gold and platinum plans come with higher premiums and lower out-of-pocket costs, while lower-tiered plans like silver, bronze and catastrophic plans come with lower premiums and higher out-of-pocket costs.
Who Is Major Medical Insurance Best For?
Major medical insurance is the rule and not the exception, meaning the vast majority of people looking for health coverage should opt for major medical insurance. It’s especially important if you live in California, Massachusetts, New Jersey, Rhode Island or the District of Columbia, where residents must pay a penalty if they fail to maintain ACA-compliant health insurance.
In some cases, you may want to enroll in a plan that wouldn’t qualify as major medical health insurance in order to receive coverage for a specific disease or situation. However, these types of plans should supplement your major medical coverage rather than replacing it.
For example, supplemental health insurance plans like hospital indemnity insurance, accident insurance and critical illness insurance can provide you with a cash benefit if you are hospitalized, get into an accident or develop a severe illness, respectively. You can then spend this money at your discretion, whether that means using it to take care of your medical treatments or paying for other expenses like your mortgage and groceries.
How To Get Major Medical Insurance
There are numerous ways you may be able to obtain major medical insurance depending on the type of coverage you are looking for and whether you meet certain eligibility requirements. For example, you could enroll in a plan through your employer, the ACA Marketplace, an insurance company’s website or a government-funded program like Medicare or Medicaid.
If you are interested in easily comparing quotes from multiple insurance companies, you should take advantage of SmartFinancial’s online insurance platform. Type your zip code below to begin a questionnaire about your coverage needs and budget and we’ll share your information with insurance agents in your area who can provide you with health insurance quotes for free.