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- Catastrophic coverage plans cover healthy individuals in case of accident or unforeseen illnesses
- Major medical policies generally have lower monthly premiums
- Healthy individuals between the ages of 20 and 64 should consider enrolling in a major medical plan
Most people would agree that health insurance is an excellent way to protect yourself against unexpected medical expenses.
But what if you are young or relatively healthy and aren’t currently being treated for medical conditions or taking prescription drugs?
For those who rarely use medical services, many health care plans may not make the clearest economic sense.
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Do I really need health insurance?
Paying expensive monthly health insurance premiums can be difficult to justify for healthy people without dependents. Even the healthiest of people are aware that an accident or other medical emergency can lead to financial ruins.
For these potential clients, health insurance companies have crafted what are called “major medical” insurance policies, also known as catastrophic coverage.
Only serious medical conditions are covered with these plans, providing financial protection against sudden illness or injury. When compared to other healthcare plans, major medical policies generally have much lower monthly premiums.
Major Medical Insurance Basics
Major medical insurance policies usually have high deductibles, making it uneconomical for most people. Coverage begins after the deductible has been met, so people with catastrophic coverage often pay for minor medical expenses out of their own pockets.
Prescription drugs, specialist visits, and routine check-ups are not likely to be covered by major medical insurance plans.
However, there are some high-deductible plans that allow for limited preventive care before the deductible is applied. This allows individuals to receive basic care while paying on their deductible.
Catastrophic coverage protects against the astronomical medical bills associated with illnesses such as stroke, heart attack, cancer, and injuries sustained as the result of an automobile accident or other calamity.
One night in a hospital can cost thousands of dollars, which is another why people avoid getting the medical care they need.
Inpatient care for an entire week can run up over $50,000 in medical bills, depending on what services are rendered.
Recovering from an illness is equally expensive, oftentimes requiring physical therapy or home health care for recovery.
High Policy Caps compared to Traditional Health Insurance Plans
Another advantage of a low premium, high-deductible plan is the comparatively high cap placed on catastrophic coverage benefits.
Major medical policies will often have an extremely high ceiling for coverage, generally between $1 to $3 million dollars.
Considering that an ambulance ride to a hospital alone can cost over $1000, protecting your life savings and assets from an unanticipated illness is no longer an option.
Accidents often happen when we least expect them. Holidays, particularly Halloween, are some of the busiest workdays for paramedics.
Do I have to use a doctor in-network?
Unlike health maintenance (HMO) or preferred provider (PPO) insurance plans, catastrophic coverage usually allows patients to be treated by a pre-approved network of healthcare providers.
In the event of an emergency, as long as the charges are considered “usual, customary, and reasonable” by the insurer, they will likely be covered by a catastrophic policy.
Group Major Medical Insurance
Many companies’ group insurance carriers offer major medical plans to workers along with other plans more suitable for larger families.
One advantage of having a high-deductible catastrophic policy is the ability to link it to a health savings account (HSA) for pre-tax savings on future medical expenses.
Some employers will make deposits into an HSA as part of a benefits package for members of their staff.
Even though contributions to health savings accounts can be made by an employer, once the money is in an HSA, it belongs to the policyholder of the associated high-deductible health plan (HDHP).
Are major medical insurance premiums tax deductible?
The IRS has set the guidelines for an HDHP minimum deductible at $1,200 annually for an individual and $2,400 for a family policy.
In addition, a maximum amount is set for out-of-pocket costs to the patient with an HDHP, which is $5,950 for individuals and $11,900 for families. Plans must adhere to these specifications for the IRS to qualify them for a correlating health savings account, as of the year 2010.
Major Medical and Pre-Existing Conditions
If a patient has a pre-existing condition such as diabetes or heart disease, they may be ineligible for a major medical insurance policy.
Those with a family medical history of illnesses like cancer, or conditions like hypertension and high cholesterol should consider purchasing major medical coverage while they are still healthy.
The majority of people who buy catastrophic policies are in either in their twenties or they are healthy 50- to 64-year-olds who want coverage while awaiting Social Security and Medicare benefits.
Medicare Part A will pay for hospital stays in a semi-private room, plus meals, tests, and doctor’s fees.
As of 2011, Medicare will pay $141.50 per day for a patient to recuperate in a skilled nursing facility for 20 days, and up to 100 days with a patient co-payment.
Medicare is available to Americans over 65 years of age, physically disabled Americans, and others who meet special criteria.
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