Medical expense insurance
Also known as: medical expense coverage, basic medical expense insurance
Medical expense insurance is health coverage that pays for the costs of medical care, such as hospital stays, surgery, and physician visits. It comes in two broad forms: basic plans with limited, first-dollar benefits, and major medical plans with broad, high-limit coverage.
Medical expense insurance reimburses the insured for the cost of medical care. It is the branch of health insurance concerned with paying providers' bills — as opposed to disability income insurance, which replaces lost wages, or long-term care insurance, which covers custodial care.
Traditional basic medical expense coverage is divided into classes: basic hospital expense (room, board, and hospital services), basic surgical expense (surgeons' fees, often paid according to a benefit schedule listing a maximum amount per procedure), and basic medical expense (physician visits and related services). Basic plans typically provide first-dollar coverage — no deductible — but their benefit limits are low, so a serious illness can quickly exhaust them.
Major medical insurance fills that gap with broad coverage and high maximum benefits. In exchange, the insured shares costs through deductibles, coinsurance (commonly an 80/20 split), and out-of-pocket maximums. A supplemental major medical policy can sit on top of a basic plan, often linked by a corridor deductible that applies after basic benefits are used up. Comprehensive major medical combines basic and major medical protection in a single policy.
Medical expense insurance is a core topic on state life and health insurance licensing exams. Expect questions distinguishing the classes of basic coverage, benefit schedules versus usual-customary-reasonable reimbursement, first-dollar coverage, and how deductibles and coinsurance work in major medical plans.
Key takeaways
- Medical expense insurance pays the costs of medical care — hospital, surgical, and physician services.
- Basic plans offer first-dollar coverage (no deductible) but low benefit limits, often set by a benefit schedule.
- Major medical plans provide broad, high-limit coverage with deductibles, coinsurance, and out-of-pocket maximums.
- A corridor deductible bridges a basic plan and a supplemental major medical policy.
- Life and health licensing exams test the classes of coverage and the basic-versus-major-medical distinction.