12.3 Basic and Major Medical Coverage, Deductibles/Coinsurance/OOP
Key Takeaways
- Basic medical plans pay first-dollar benefits with no deductible but have low, separate benefit limits.
- Major medical provides high overall limits with a deductible, coinsurance, and an out-of-pocket maximum.
- After the out-of-pocket maximum is reached, the plan pays 100% of covered charges for the rest of the year.
- A corridor deductible sits between basic and supplemental major medical in a superimposed plan.
- Premiums and non-covered or balance-billed amounts never count toward the out-of-pocket maximum.
Basic Medical Expense Coverage
Basic medical expense plans pay first-dollar benefits, meaning there is typically no deductible, but each category of benefit has a relatively low, separate limit. The classic three are:
| Basic Benefit | What It Covers | Common Limit Structure |
|---|---|---|
| Hospital expense | Room, board, and ancillary charges | Daily room limit times a maximum number of days |
| Surgical expense | Surgeon fees | A scheduled amount or a relative-value unit schedule |
| Physician (medical) expense | Non-surgical doctor visits, often in hospital | Per-visit dollar cap |
Because basic plans run out of benefits quickly, they were historically supplemented by major medical.
Major Medical Coverage
Major medical provides broad coverage with a high overall maximum (modern ACA plans have no annual or lifetime dollar limit on essential benefits). It introduces the three cost-sharing features that dominate exam math:
| Feature | Definition |
|---|---|
| Deductible | Amount the insured pays before the plan pays anything |
| Coinsurance | Percentage split of covered charges after the deductible (e.g., 80/20) |
| Out-of-pocket (OOP) maximum | The cap on what the insured pays in a year; then the plan pays 100% |
Two structures combine basic and major medical:
- Supplementary major medical uses a corridor deductible, a deductible that applies only after basic benefits are exhausted, before major medical kicks in.
- Comprehensive major medical integrates both into one plan with a single deductible.
Cost-Sharing Math: A Worked Scenario
Consider an insured with a $2,000 deductible, 80/20 coinsurance, and a $6,000 out-of-pocket maximum who incurs $30,000 of covered charges in one year.
Step 1 Deductible: insured pays $2,000 (remaining bill $28,000)
Step 2 Coinsurance 20%: 20% of $28,000 = $5,600 to insured
Step 3 Running OOP total: $2,000 + $5,600 = $7,600
Step 4 Apply OOP cap: capped at $6,000
Step 5 Plan pays the rest: $30,000 - $6,000 = $24,000
The insured's total cost is $6,000, not $7,600, because the out-of-pocket maximum stops further cost-sharing. Once the cap is reached, the plan pays 100% of additional covered charges for the rest of the plan year.
Trap: Coinsurance is applied to the amount after the deductible, not the full bill. Multiplying $30,000 by 20% (=$6,000) by coincidence equals the right answer here, but that method is wrong and fails on other numbers.
What Counts Toward the Out-of-Pocket Maximum
The exam frequently tests which dollars accumulate toward the OOP cap.
| Counts Toward OOP Max | Does NOT Count |
|---|---|
| Deductible | Monthly premiums |
| Copayments | Charges above the allowed amount (balance billing) |
| Coinsurance | Non-covered services |
| In-network covered charges | Out-of-network costs (in many plans) |
Additional definitions you must know:
- Stop-loss provision: another name for the coinsurance-limiting feature that triggers 100% plan payment once OOP is met.
- Common accident provision: when several family members are injured in one accident, only a single deductible applies.
- Carryover provision: expenses incurred in the last few months of a year (often October to December) can apply to the next year's deductible.
Deductible Variations and the Coinsurance Trap
Deductibles come in several flavors the exam distinguishes:
| Deductible Type | How It Applies |
|---|---|
| Per-cause (per-occurrence) | A separate deductible applies to each distinct illness or injury |
| Calendar-year (all-cause) | One deductible per year regardless of the number of claims |
| Family deductible | A combined dollar amount that, once met, satisfies the deductible for all members |
| Embedded individual | One family member can meet an individual limit even before the family limit is reached |
The most common scoring error on the licensing exam is applying coinsurance to the wrong base. Coinsurance applies to the covered charges remaining after the deductible, not to the gross bill, and only until the out-of-pocket maximum is reached.
Second worked example: deductible $500, 70/30 coinsurance, $4,000 OOP max, on a $12,000 covered claim. The insured pays $500, then 30% of the remaining $11,500 = $3,450, for a running total of $3,950. That is below the $4,000 cap, so the insured pays the full $3,950 and the plan pays $8,050. Here the cap is not triggered, which is exactly the variation the exam uses to test whether you mechanically cap every answer.
An insured has a $1,000 deductible, 80/20 coinsurance, and a $5,000 out-of-pocket maximum. She incurs $40,000 of covered charges. How much does she pay out of pocket?
Which of the following dollar amounts counts toward an insured's annual out-of-pocket maximum?
Comprehensive major medical and integrated deductibles
Most modern medical plans are comprehensive major medical, which folds basic and major medical into a single contract with one integrated deductible rather than separate first-dollar basic benefits. The exam contrasts this with older supplemental (superimposed) major medical, which sits on top of a base plan and uses a corridor deductible that applies only after the base benefits are exhausted.
Stop-loss, the coinsurance limit, and how cost-sharing stacks
The stop-loss (coinsurance limit) is the dollar point after which the plan pays 100% of covered charges. Cost-sharing stacks in a fixed order on each claim: the insured pays the deductible first, then the coinsurance percentage on charges above it, until the out-of-pocket maximum is reached, after which the plan pays everything. Copayments are flat per-service charges (e.g., $30 per office visit) that, under ACA plans, also count toward the out-of-pocket maximum but are separate from the percentage coinsurance.
Eligible vs. usual, customary, and reasonable charges
Insurers reimburse only usual, customary, and reasonable (UCR) amounts; charges above UCR for out-of-network care can be billed to the patient and may not count toward the out-of-pocket maximum.
Under a major medical plan, in what order does an insured's cost-sharing apply to a covered claim?