Major Medical Insurance Basics

Major medical insurance plans come in different varieties and options. Here are the basics that should be considered.


You’ll pay a fee, or premium, to the insurance company to keep your health coverage. Premiums are paid monthly, semi-annually, or annually. Most plans give a choice on the frequency of payments. You may get a slight discount for paying your premiums annually. The plan you choose should have a monthly premium that you can afford to pay.

Most major health insurance policies have other costs, in addition to the insurance premium. Deductibles and copayments are other fees to consider.


The deductible, which is the amount you must pay out of pocket before the insurance will pay anything. For example, if your deductible is $2,000, you’ll be responsible for the first $2,000 in medical expenses each year. The insurance won’t pay any claims until that $2,000 has been paid. The deductible renews every year. The $1,000 you paid last year, doesn’t apply to the deductible this year. Not every major medical health insurance policy has a deductible, but generally those with higher deductibles have a lower monthly premium.

The deductible should be an amount you can afford to pay out of pocket all at once if necessary. For example, if you’re an accident, you’ll have to pay the full deductible immediately before the insurance kicks in.

Co-Insurance and Co-Payments

The insurance provider may also require you to pay a certain portion of your health care costs. Co-insurance payments are a percentage of health care costs. For example, you may be expected to pay 20% of the cost while the insurance provider pays the other 80%. Co-payments are a fixed dollar that you’ll pay before the insurance pays. Co-insurance and co-payments are often due at the time you receive medical services. If they’re not paid when you receive services, you’ll receive a bill from the medical service provider.

Out-of-Pocket Maximum

The out-of-pocket maximum puts a cap on the amount you’ll have to pay out of pocket each year. Once you reach the out-of-pocket limit, then the insurance pays 100% of all your health care expenses.

Maximum Coverage Amount

Some major medical insurance plans have limits on the amount of coverage they’ll provide you. The lifetime maximum is usually in the millions of dollars and is the highest amount the insurance company will pay on your behalf. If you reach your lifetime maximum, the insurance provider will no longer pay any of your medical expenses. You should look for at least a $1 million maximum to be sure the insurance will last a lifetime. Higher lifetime maximums may be necessary if you have a serious illness.

Types of Major Medical Insurance

There are a few types of major medical insurance policies.

An indemnity insurance plan lets you visit any medical provider. The insurance company pays their part of the claim after you’ve met the deductible and paid any co-insurance or co-payments. If the medical service provider charges more than what the insurance company considers to be customary, you’ll have to pay the difference.

An HMO, or health management organization, plan requires you to receive all your health care from a provider that’s in the organization’s network. You’ll be required to choose a primary care physician that coordinates your health care. You can’t see any other doctor without first receiving a referral from your primary physician.

With a PPO, preferred provider organization, plan there are preferred providers who offer services at lower prices than those out of network, however, you’re not required to see an in-network provider. You also do not have to choose a primary care physician. You may have to pay upfront and be reimbursed for services you receive from out of network providers.

A POS or point-of-sale plan requires you to choose a primary care physician who coordinates your health care, but you’re allowed to see out-of-network service providers. The insurance pays a smaller percentage of charges from out-of-network providers and you’re responsible for the outstanding amount.

These major medical insurance plans all have varying premiums. You have to choose the one that’s best for your medical needs.