The medical insurance causes of loss (perils) are accident and
sickness. The three basic categories of medical insurance are
medical expense insurance, dental expense insurance and limited
Medical expense insurance.
Coverage for medical expense insurance is available in individual
and group policies. Both forms generally provide similar services.
However the policies are modular in form. This means that a
particular medical expense policy may have totally different
provisions or benefits than another medical expense policy.
Because of this it is generally difficult to compare one medical
expense policy to another because the number and provisions of the
modules may vary widely. As an example, one policy might cover
any and all x-rays. Another policy might cover only $25.00 per x-ray.
A third policy might limit the number of x-rays per policy year.
Because of this it is important to keep policy characteristics in mind
when reviewing policies.
Under group health insurance policies, family offspring are
normally covered from birth until they complete college or reach a
stated age. Physically incapacitated children may be covered for a
longer period of time.
Medical expense insurance policies would be assumed to provide
worldwide coverage as they do not define a territory. However, some
policies may limit coverage while traveling or living abroad. Policy
forms may restrict coverage to particular physicians or hospitals yet
have limited exceptions.
There are two benefit levels of medical expense insurance
policies. One form provides only the basic medical expense
coverages while the other form offers major medical expense
Basic Medical Expense coverages. — These coverages often
have deductibles on an annual per person and per family basis.
They may also have internal limits on specific benefits such as a
dollar limit on certain tests. The three areas of basic medical
expense coverages are :
1) Hospital expense
2) Surgical expense and
3) Miscellaneous Medical expense.
Hospital expense coverage. — This is the coverage for room and
board expenses of an insured who is admitted to the hospital. It often
listed on the policy as the “average cost of a two-bedded room” in
that way the insurance company is not locked in at a certain dollar
benefit level. This approach also enables the insurance company to
pay different dollar levels of benefit depending on the locale of the
Surgical expense coverage. — This section identifies the
maximum amount that will be paid for various types of surgeries. It
may also be called a surgical schedule. Another approach used for
surgical costs is a relative value schedule. In this instance a
numerical value or weight is assigned to each surgical procedure
and multiplied by a dollar amount. This is an attempt to pay the
“reasonable and customary” charges that prevail in the insured’s
area by adjusting the dollar amount.
Miscellaneous medical expense coverage. — This section covers
all other chargeable items that are included in this general policy
area. Some items may have a dollar limit or time restriction and may
vary depending on the type of item or the location of the policyholder.
Major Medical Expense insurance. This coverage was originally
designed as a separate policy form to overlay the basic medical
expense policy. Its purpose was to provide a comprehensive high
limit excess coverage in addition to the basic policy.
Today the coverage is normally issued as a Comprehensive Major
Medical Expense policy. This singular form offers primary coverage
with an individual and family annual deductible and a coinsurance
contribution by the insured. The policy will be issued with a high
dollar limit or even no dollar limit on the individual coverages.
However, the policy will generally have a lifetime maximum dollar
amount per insured. Medical care may be limited for particular
procedures.Coverage limitations on Medical Expense policies. While the
policies are deigned to provide broad medical expense coverage the
policies will often include limitations on coverage for maternity,
mental illness, and alcohol and drug dependency.
Maternity benefits limitation. — This coverage may not be
provided in individual policies except by endorsement. Under group
policies federal law requires the coverage. There may be an internal
policy limit on the amount of prenatal or postnatal care or charges in
connection with normal delivery, surgical delivery, miscarriage or
Mental illness coverage. — Insurance benefits can be limited as to
the total amount payable under the policy, the amount payable per
office visit and/or the number of office visits. A coinsurance provision
may apply as well.
Alcohol and drug dependency. — This type of treatment may be
restricted to inpatient care and have a limit on the number of days of
Cost-containment provisions. Various methods of cost
containment have been developed by the health care industry and
have been added by insurance companies to their policies. These
methods are designed to encourage the insured to be more selective
in their medical care expenses. These provisions include preadmission testing, outpatient surgery, hospice care and second
Pre-admission testing. — Generally these tests are done on an
outpatient basis for non-emergency surgery. In emergency situations
tests are completed following the admission of the insured.
Outpatient surgery. — This involves surgery which does not
require the patient to be hospitalized overnight. In recent years the
number and types of outpatient surgery has increased significantly.
Hospice care. — Terminally ill patients often receive hospice care
which includes counseling service for the patient and family
members. While it can involve the use of medication and life support
devices it may not require full hospital services. The benefits are
usually available for care provided outside the hospital setting either
at home or at a hospice care center.Second surgical opinions. — When elective surgery is involved the insured may be required to obtain a second or even a third surgical
opinion to confirm that the procedure is necessary. If an insured
decides to have the surgery without obtaining a second surgical
opinion the policy may limit payment by a percentage amount.
Medical Expense exclusions. Policy exclusions found in the
policies include many of the following: Intentional injury, Prescription
drugs for outpatient use, Dental care except for some emergency
care, Eye exams, Cosmetic surgery, Infertility procedures, Treatment
not authorized by a physician, Treatment in a government facility and
Treatment available under a Workers Compensation Act Limited medical expense policies.
These policies provide limited insurance coverage for specific
types of losses. Examples are Dread Disease policies (cancer and
others), Hospital Income (indemnity), Travel Accident insurance and
Credit Disability insurance.
Dread Disease policies. — This type of policy provides limited
hospital and miscellaneous medical expenses benefits for cancer,
polio and several dread diseases among them such things as
meningitis, smallpox and encephalitis. There can be internal limits on
one or more of the covered diseases. Benefits are paid in addition to
any other health coverage of the insured.
Hospital Indemnity insurance. — The policies pay a stated dollar
amount during the period the insured is confined to a hospital. The
available benefit is an amount per day, week or month and is paid
regardless of any other health insurance. The coverage provides
income that can be used to supplement other health insurance
during a hospital stay. The benefits may be greater if the insured is in
an intensive care unit.
Travel Accident insurance policies. — Benefits are available for
accidental death and dismemberment losses incurred while
traveling. Some policies may be limited to specific types of travel ortransportation while others may provide 24-hour-a-day coverage
from any type of travel related accident. Coverage can apply from
the time the insured leaves home until returning.
DENTAL EXPENSE INSURANCE.
There are both individual and group dental expense policies
available. When the insurance is offered as part of a group insurance
plan the benefits can be provided on either a comprehensive basis
or a scheduled basis. An individual insurance plan may also offer
either type of plan.
Comprehensive plan. — Similar to a comprehensive majormedical expense policy where payment is made on the basis of reasonable and customary charges with a deductible and
coinsurance provision applying.
Scheduled plan. — Similar in approach to a surgical expense
policy where a maximum amount is stated for various types of
Both individual and group policies encourage preventive dental
care by providing for routine checkups and cleaning of teeth. The
coverage may be subject to an annual limit per covered person with
inside limits that apply to items such as dentures, bridges, inlays,
crowns and braces. An annual or lifetime per person limit may also
apply to some features. The exclusions are similar to those found in
major-medical expense policies.
Disability insurance policies provide income replacement when the
insured is disabled because of accident or sickness. Disability maybe defined in several ways and the cause of the disability may also
be restricted. The length of time and amount of benefit paid is
another condition of these policies. The policies are issued, either
individually or on a group basis.