Major medical health insurance is a type of health insurance that covers the expenses associated with serious illness or hospitalization.
This article will provide an overview of what “major medical” means, the regulations that apply to these plans, and things that consumers need to be aware of when shopping for health insurance.
Major medical health insurance is the terminology that was historically used to describe comprehensive health plans that covered most necessary care. Since theAffordable Care Actwas implemented, the term “minimum essential coverage” is frequently used instead, although they’re not entirely interchangeable.
Minimum essential coverageis what you had to have between 2014 and 2018 in order to avoid theACA’s penalty for being uninsured. Although the ACA’s individual mandate still exists, the federal penalty for not having minimum essential coverage was eliminated at the end of 2018 (some states have their own penalties).
But the concept of minimum essential coverage is still important because several qualifying life events only trigger a special enrollment period (opportunity toenroll outside of the annual open enrollment period) if you already had minimum essential coverage in effect before the qualifying event.
With the exception of short-term health insurance (discussed below), all major medical health insurance plans count as minimum essential coverage. And most minimum essential coverage is also major medical insurance.
Also note that while Medicare Part A is considered minimum essential coverage, Medicare Part B on its own is not.Most Medicare beneficiaries have both parts, either in the form of Medicare Advantage (Part C) or Part A plus Part B (plus supplemental coverage in most cases), or Part A plus employer-sponsored coverage. But if a person were to have just Medicare Part B, they would not have minimum essential coverage.
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“Real” Health Insurance
Major medical plans usually have a set amount, ordeductible, which the patient is responsible for paying. Once that deductible is paid, the plan typically covers most of the remaining cost of care. There is usuallycoinsuranceafter the deductible is met, which involves the patient paying a percentage of the bill (20% is a common amount) and the insurance company paying the rest.
Once the patient’s total share of in-network costs (including the deductible, coinsurance, and any applicable copays) reach the plan’smaximum out-of-pocket limit, the health plan pays 100% of the patient’s covered in-network care for the rest of the year.
In 2023, all ACA-compliant plans must cap in-networkout-of-pocket costs(for essential health benefits) at no more than $9,100 for an individual and $18,200 for a family.In 2024, this upper limit on out-of-pocket costs will increase to $9,450 for an individual and $18,900 for a family.
Major medical plans that arenotfully ACA-compliant (ie, grandmothered andgrandfatheredplans) 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 thattraditional Medicaredoes not have a cap on out-of-pocket costs, but this is not the model that private insurance typically follows. Most Original Medicare enrollees have other supplemental coverage—either viaMedigap, employer-sponsored coverage, or Medicaid—in order to avoid the unlimited out-of-pocket exposure that goes along with Original Medicare).
Major Medical Versus Plans ThatAren’tMajor Medical Coverage
There’s no official definition for major medical coverage. It’s generally accepted that plans that are minimum essential coverage (which is defined) are providing 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 coverthe ACA’s essential health benefits(with the exception of preventive care,which has to be covered on all non-grandfathered plans, including large group and self-insured plans), while individual and small group plans are. But they all count as minimum essential coverage.
In nearly all cases, large group plans would also be considered major medical coverage, although as mentioned above, some large employers offer “skinny” health plans in an effort to circumvent the more significant of theemployer mandate penalties.
These “skinny” policies do not provide comprehensive coverage and cannot be considered major medical coverage. Large employers are still subject to a penalty under the employer mandate if they offer these plans to their full-time employees, but it can be a lesser penalty than the one they’d face if they didn’t offer coverage at all.
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.
Some States Consider Short-Term Health Plans Major Medical Coverage
Short-term health insurance plans are closer to “real” health insurance than other 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).
In 2018, the Trump administration relaxed the rules for short-term plans, allowing them to have initial terms of up to 364 days, and total duration, including renewals, of up to 36 months.States can impose stricter rules, however, and many have done so, meaning that there are numerous states where short-term plans are limited to much shorter durations.
And the Biden administration has proposed a rule change for short-term plans in 2023. If finalized, it would sharply limit short-term plans, capping their total duration at no more than four months, including renewals.
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. In contrast, the other types of 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 30+ hours per week for a large employer (50+ employees), they have to offer coverage thatprovides minimum valuein 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.
As noted above, a small minority of large employers—particularly those with a low-wage, high-turnover workforce—opt to offer plans to their full-time workers that do not provide minimum value and that cannot be considered major medical coverage.
These employers face a penalty (albeit a potentially smaller one than they’d face if they didn’t offer coverage at all), but their employees have the alternative of obtaining major medical coverage inthe exchange, and can receive premium subsidies if their income makes them eligible.
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.
If you buy coverage inthe exchangein your state, you may be eligible forpremium subsidiesto offset the cost of purchasing major medical coverage. Subsidy eligibility is based onhousehold income, and extends well into the middle class (on the lower end of the income scale, 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). Grandfathered plans can remain in force indefinitely, as long as they’re not substantially changed. Grandmothered plans can currently remain in place until further notice, at the discretion of states and insurers.
Summary
The term “major medical health insurance” doesn’t have an official definition. But it generally refers to comprehensive health insurance that provides a solid safety net in the event of a serious illness or injury. Major medical health plans can have high deductibles and out-of-pocket costs, even though they do provide comprehensive coverage. Most plans that provide minimum essential coverage (a term that is defined under the ACA) can be considered major medical coverage.
A Word From Verywell
It’s essential to have major medical health coverage; it provides peace of mind and will protect your health and your finances in the event of a serious medical condition. There are various sources of major medical coverage, although most people get it from an employer, the government (Medicaid and Medicare), or as a self-purchased plan.
If your employer doesn’t offer coverage and you’re not eligible for Medicare or Medicaid, it’s essential that you shop for coverage in your state’s health insurance exchange, to ensure that you’re getting real major medical coverage. You can start at HealthCare.gov; if your stateuses its own enrollment platform, HealthCare.gov will direct you there.
10 Sources
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Internal Revenue Service.Find out if your health care coverage is minimum essential coverage under the health care law.
U.S. Department of Health and Human Services.Premium Adjustment Percentage, Maximum Annual Limitation on Cost Sharing, Reduced Maximum Annual Limitation on Cost Sharing, and Required Contribution Percentage for the 2023 Benefit Year.
U.S. Department of Health and Human Services. Center for Consumer Information and Insurance Oversight.Premium Adjustment Percentage, Maximum Annual Limitation on Cost Sharing, Reduced Maximum Annual Limitation on Cost Sharing, and Required Contribution Percentage for the 2024 Benefit Year.
Clerveau, Gabrielle, et al. KFF.A Snapshot of Sources of Coverage Among Medicare Beneficiaries.
District of Columbia Department of Insurance, Securities, and Banking.Major-Medical Health Insurance vs. Short-Term Health Insurance Fact Sheet.
Department of the Treasury, Department of Labor, Department of Health and Human Services.Short-Term Limited Duration Insurance.
CMS Newsroom.Short-Term, Limited-Duration Insurance; Independent, Noncoordinated Excepted Benefits Coverage; Level-Funded Plan Arrangements; and Tax Treatment of Certain Accident and Health Insurance (CMS-9904-P).
Norris L. healthinsurance.org.Will You Receive an ACA Premium Subsidy?
Norris, Louise. healthinsurance.org.What Is a Grandmothered Health Plan?
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