What Exactly Is Comprehensive Health Insurance, Anyway?

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Updated March 28, 2015.

Also known as major-medical insurance, comprehensive health insurance is insurance that pays costs related to a wide range of necessary health care services. It doesn’t limit coverage to only a few illnesses, conditions, or situations.

In the United States, all health insurance that provides coverage for the essential health benefits outlined by the Affordable Care Act is considered comprehensive health insurance.

In addition to Obamacare, Medicare, most Medicaid, military Tricare, and most employer-sponsored group health insurance plans are considered comprehensive health insurance plans.

What Comprehensive Health Insurance Is Not

Comprehensive health insurance stands in contrast to supplemental health insurance, fixed-benefit indemnity plans, cancer insurance, hospital confinement insurance, critical illness insurance, limited-benefit health insurance, and mini-med plans. These aren’t considered comprehensive for one or more reasons:
  • They place strict limits on the types of medical problems they’ll cover. For example, cancer insurance only pays if you get cancer. It won’t pay if you have a heart attack.
  • They don’t pay for the health care itself, but instead pay cash to the policy holder when a covered event takes place. The amount of cash paid has nothing to do with the actual cost of the health care that triggered the benefit payment. For example, a hospital confinement policy may pay you $100 for each day you’re in the hospital whether the actual daily cost of the hospitalization was $100 or $10,000.

  • They place annual, lifetime, or per-event caps on benefits. For example, a mini-med plan may cover visits to the doctor’s office, diagnostic testing, and hospitalization services, but limit the payout to $150,000. That’s fine for routine problems, but if you’re in the intensive care burn unit for a month and require 10 surgeries, its benefit cap won’t give you the comprehensive protection you need.

Does Comprehensive Health Insurance Pay for Everything, Then?

No, comprehensive health insurance doesn’t pay all the costs of your health care. For example, managed care plans such as HMOs, PPOs, and EPOs all limit the health care they pay for to skilled health care that’s medically necessary. In addition, some managed care plans won’t pay for care unless it was administered by a health care provider in the plan’s provider network. Most managed care plans won’t pay for prescription drugs that aren’t on the health plan’s drug formulary unless there are extenuating circumstances. These are all medical management techniques designed to keep health care costs in check.

However, these medical management techniques don’t result in less comprehensive coverage. For example, an HMO that requires you to use only in-network providers won’t refuse to pay for the heart surgery you need. It just places limits on which surgeons it will pay to do the surgery and which hospitals it will pay to care for you.

Likewise, a drug formulary that excludes a specific drug must provide coverage for another drug to treat that disease. It’s still covering treatment of the disease, just not with the most expensive drug.

In addition to medical management techniques, comprehensive health insurance plans use cost-sharing like deductibles, copayments and coinsurance to incentivize members to use only the health care services they truly need.

Although this means you’re paying for part of your medical care, the financial risk you face is limited by the plan’s out-of-pocket maximum. After an insured has paid enough in deductibles, copayments, and coinsurance in a single year to have met the out-of-pocket maximum, the insurer then pays 100% of the cost of medically necessary care for the rest of the year.

For example, if you had an out-of-pocket maximum of $6,000 and needed a $300,000 organ transplant, you would pay deductibles, copayments, and coinsurance until you had paid $6,000 that year. Your comprehensive health insurance would pay the remaining cost, $294,000. If later that same year you needed more care, your insurer would cover 100% of the cost for that care, also.
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