12.3 Basic and Major Medical Coverage, Deductibles/Coinsurance/OOP

Basic Medical vs. Major Medical

Historically, Basic Medical Expense coverage paid first-dollar benefits—typically no deductible—but only up to relatively low, separate limits for specific categories such as hospital, surgical, and physicians' (medical) expense. Basic plans are narrow and exhaust quickly.

Major Medical coverage was designed to fill the gaps: it provides broad coverage with high maximum limits, but applies a deductible and coinsurance so the insured shares cost. Two structures appear on the exam:

• Supplementary (Superimposed) Major Medical — layered on top of a basic plan; it begins paying after the basic limits are exhausted, often with a corridor deductible between the two layers.
• Comprehensive Major Medical — a single integrated plan combining basic and major medical features under one deductible and coinsurance structure.

Deductible Mechanics

A deductible is the amount the insured pays before the plan pays. Variations are tested heavily:

The carryover provision is a classic trap: charges in October–December can be applied to the following year's deductible so the insured is not penalized for late-year claims.

Coinsurance, Copays, and the Stop-Loss

Coinsurance is a percentage split of covered charges after the deductible—commonly 80/20, where the plan pays 80% and the insured pays 20%. Copayments are flat dollar amounts per service. The out-of-pocket maximum (stop-loss limit) caps the insured's annual cost-sharing; once reached, the plan pays 100% of remaining covered charges for the year.

Worked numeric (calendar-year comprehensive plan): deductible $500, coinsurance 80/20, stop-loss $3,000. The insured incurs $25,000 in covered charges.

1. Insured pays the $500 deductible.
2. Remaining covered charges: $24,500. Insured's 20% share = $4,900.
3. But the stop-loss limits insured cost-sharing. Counting the deductible toward the OOP, the insured stops at $3,000.
4. Insured total = $3,000; plan pays $22,000. Once the insured hit $3,000, the plan covered 100% of the rest.

Lifetime Maximums, Exclusions, and Coordination

Older major medical plans imposed a lifetime maximum benefit; under the Affordable Care Act (ACA), plans may not impose lifetime or annual dollar limits on essential health benefits. Standard exclusions still apply—cosmetic surgery, experimental treatment, work-related injuries (covered by workers' compensation), and self-inflicted injury are commonly excluded.

When a person is covered by two group plans, the Coordination of Benefits (COB) provision prevents the insured from collecting more than 100% of the loss. The primary plan pays first; the secondary plan may pay the balance up to its own limits. For dependent children covered by both parents, the birthday rule generally makes the plan of the parent whose birthday falls earlier in the calendar year the primary plan.

Basic Medical Sub-Coverages

Basic medical expense coverage is really a bundle of narrow, separate benefits, each tested by name:

• Basic Hospital Expense — pays room and board up to a daily limit for a set number of days, plus miscellaneous hospital charges (lab, drugs, supplies), usually with no deductible.
• Basic Surgical Expense — pays for surgeon's fees, often using a surgical schedule (a dollar amount assigned to each procedure) or a relative value approach.
• Basic Physicians' (Medical) Expense — pays for non-surgical physician visits, typically capped per visit and per number of visits.

Because each sub-coverage has a low ceiling, a serious illness quickly exhausts basic coverage—which is precisely why major medical exists to sit on top of or replace it.

A Worked Supplementary Major Medical Example

Consider a supplementary major medical plan layered over a basic plan. The basic plan pays the first $2,000 of covered charges in full. A $300 corridor deductible then applies before the major medical layer begins, after which 80/20 coinsurance governs.

Suppose total covered charges are $12,000.

1. Basic plan pays the first $2,000.
2. The insured pays the $300 corridor deductible out of the next charges.
3. Remaining charges subject to major medical: $12,000 − $2,000 − $300 = $9,700.
4. Major medical pays 80% of $9,700 = $7,760; the insured pays 20% = $1,940.
5. Insured total = $300 + $1,940 = $2,240 (absent a stop-loss); the plans together pay $9,760.

This sequencing—basic first, corridor deductible, then coinsurance—is the classic supplementary-plan trap; candidates who skip the corridor or apply coinsurance to the full bill get the wrong answer.

A comprehensive plan avoids this layering: one deductible and one coinsurance percentage apply from the start, with no separate basic layer or corridor. When a question describes a single integrated deductible and coinsurance, treat it as comprehensive; when it describes a basic plan paying first with a deductible bridging to a major medical layer, treat it as supplementary.