INSURANCE 101: Basic Medical Insurance

The purpose of medical expense insurance is to provide financial protection against costs associated with hospitalization, surgical procedures, physicians’ fees, as well as many other associated costs.  Considering that escalating medical expenses is one of the leading causes of bankruptcy, it is vital to be insured under some type of medical expense insurance.

Types of Medical Expense Insurance

• Basic Medical Insurance
• Major Medical Insurance

Basic Medical Insurance, also known as Basic Medical Expense plans provide limited benefits in the form of indemnity payments which are paid directly to the insured, and are provided as a limited benefit for services incurred by the insured.

The indemnity payment is limited to a specific amount of money that is provided by the insurer to an insured on a daily basis for a specific period of time to aid in offsetting costs incurred by the insured for his or her illness or injury.  Again, since this payment is limited to a specific amount, it is not designed to fully cover an insured’s medical expense.

It is also important to note here that the indemnity payments, once provided by the insurer, is the property of the insured, and as such, can be used to help pay for the incurred medical expenses, for which is provided, or for any other purpose in which he or she decides to use the money.  Again, the indemnity payments are considered the insured’s money.

Basic medical expense plans are also referred to as First-Dollar Coverage because they provide benefits up front to the insured without having to satisfy any plan deductible.

In comparison ‘major medical’ insurance provides comprehensive coverage and is less limited, covering most medical expenses completely after an insured meets certain plan stipulations such as the plan’s deductible.

Unfortunately, with the rising costs of health care, basic medical expense plans are less effective in covering healthcare costs since they are limited to the type and duration of services being covered as well as the amount associated with these services.  Basic medical expense plans, though limited, do provide some financial protection, and therefore, should be reviewed. Simply stated, basic medical expense plans provide limited coverage for basic hospital, surgical, and physicians’ fees.

Basic Medical Insurance Covers:

• Basic hospital expenses
• Basic physicians’ (non-surgical) expenses
• Basic surgical expenses
• Basic Hospital Benefits

Basic hospital benefits include coverage for an insured’s Room and Board, payable as either a fixed daily dollar amount or payable over a fixed period of time.

Additional charges covered by basic hospital benefits include the costs for medications, anesthesia, X-rays, as well as the costs involved with the use of an operating room.  Costs are covered up to a certain amount as specified in the insurance contract.

Though basic hospital expense insurance covers many expenses associated with a hospital, it does not include coverage for any surgeons or other physicians’ services performed while in the hospital, for that one needs the following ‘basic physicians’ benefits and basic surgical benefits

Basic Physicians’ (Non-Surgical) Benefits
Basic physicians’ benefits provide an insured with funds to help cover the costs rendered by non-surgical physicians while he or she is confined to a hospital, as well as physicians’ office visits outside of the hospital.  Physicians’ benefits are provided in the form of fixed indemnity payments made to the insured to help cover non-surgical expenses.  The amount of benefit for a physician’s visit is fixed, regardless of the actual expense incurred.

As an example, if the basic physician’s benefit contract provides an insured with a $100 indemnity payment per visit, but the actual expense of the visit is $120, then the insured is still responsible to pay the additional $20 for the physician’s visit.  On the other hand if the actual visit expense is $80, then the indemnity payment would also be $80, as not to exceed the actual cost, but still within the per visit limit established in the insurance contract.

Basic Surgical Benefits
Basic surgical benefits provide an insured with funds to help cover the costs associated with in-hospital surgeon’s services and services rendered by an anesthesiologist before surgery, though, the anesthesia drug, itself, is covered under the miscellaneous expenses just mentioned in a basic hospital expense plan.

Methods to Determine Surgical Expense Benefits

Schedule of Surgical Procedures
This is the primary method used to determine surgical expense benefits.  It determines the amount of benefit by assigning a specific value, or dollar amount, to each type of surgical expense provided; however, if the cost of surgery exceeds a specified amount, the insured would then be financially responsible for the remaining cost.

Usual, Customary, and Reasonable (UCR) Approach
This method follows the UCR approach explained earlier to cover the expense according to usual and customary costs based on other similar surgical procedures within a particular geographical area.  It also covers the expense of a surgery if it is deemed ‘reasonable’ when compared to other facilities performing the same surgery in the same geographical area.

Relative Value Scale
This approach is similar to the schedule of surgical procedures mentioned above, except instead of assigning a specific dollar amount for each procedure, a pre-arranged point system is established. Points are based on the severity of the procedure as well as the part of the body in which the surgery is performed.

Additional Basic Benefit Plans
In addition to basic hospital, surgical, and physician’s benefits, basic medical expense insurance provides a variety of additional plans covering specific medical needs and associated expenses.  These additional plans provide limited coverage for maternity, mental health, private nursing care expenses, hospice care, nursing home and home health care expenses, as well as limited outpatient care coverage.