Understanding Limited Liability vs Standard Major Medical Plans

Understanding Major Medical vs Limited Benefit (or Indemnity) Insurance

As  most people have never truly been educated in the field of health insurance. there exists many areas of possible confusion that can be totally catastrophic if not understood. This is in identifying and understanding the difference between major medical and limited benefit insurance programs.

While both types of programs have built in limits such as the total lifetime maximum the policy will pay out, possibly the number of times a doctor office visit will be covered, the comparisons essentially end there.

In most states, major medical policies are tightly regulated by the state insurance commissioners and require that a person be licensed to sell them. Their literature is closely monitored to accurately explain the offerings.. although much of the "explanation" is printed in very small type and sometimes confusing terms.

In contrast, in most states, the limited liability policies are not regulated or are loosely regulated and often do NOT require a sales agent to have an insurance license. These are often the policies one sees sold via TV, magazines, direct mail.. and yes, over the internet.

While it may sound as if the limited liability policies are starting to sound not very good.. they in fact do have a place and the better ones actually have some value.

Most of the limited liability policies have no underwriting requirement, so one place they can be useful is for the person who for one reason or another is deemed uninsurable by the major medical companies.  They will take that person and issue a policy... but here's your first "BEWARE". That is to beware of coverage of any pre existing conditions..

While we're on the  subject of when they might fit in, the only other place or reason to consider them is when major medical insurance is beyond financial reach. "Something is better than nothing" is the thinking that goes along with a Limited Benefit plan.

Other than the regulation and agent licensing, how do you recognize the difference?

The first is that nearly all major medical plans start with some kind of a deductible, followed by a co-insurance percentage.  In contrast, a limited benefit plan usually has NO deductible and begins to pay out immediately upon benefit qualification for a specified medical event or condition.

As stated earlier, there are good limited benefit plans and there are the other kind... and when taken and understood properly, the good limited benefit plans can fill a need.

There are two things you, as the proposed insured, needs to really look for if you are considering a limited benefit plan. The first is to understand what triggers the benefit and how it is paid; how you  qualify for it, and of course, be absolutely certain you understand what it is.

The biggest area of confusion is usually in the area of hospitalization. For most people, "hospitalization" bills are one big common happy family. In actuality they are broken up and in the strictest sense, the hospital bill is essentially a bill for your nice sterile, comfortable "room and board" but it often includes nursing services.

Those medications you get in the hospital?  Generally not covered in the hospital bill, but are like prescriptions.. you must understand your limited benefit plan well to see about inpatient and outpatient prescriptions.  Then  there is the inevitable lab work. It could be radiologic lab such as MRI, Xray, etc. Of course we can't leave out blood work. The blood lab and the radiologic work may be separate profit and billing centers, and while you may be in the same hospital physically, if you are wheeled from one lab or room to another, this is like an outpatient visit. Is your limited benefit plan limiting your benefit payment to X number of diagnostic visits per year?   Better understand it.

Then the friendly doctor that stops by. If he or she is your surgeon, you are probably  charged on surgical bill that has a schedule of payment... but what about the hospital Resident physical who stops by?  Is he or she in the hospital bill.... or is this a doctor visit to count against your limited doctor visit payments.. usually 5-7 per year?  And of course.. if you have a family doctor and he or she stops by and looks at your chart. Chances are you're going to have a "doctor visit" billed.   If your limited benefit plan only allows for a few doctor visits a year and does not differentiate them from in patient or out and you're in the hospital 2 weeks.. be prepared for a shock.

And if you   have cancer and need chemo, or renal failure and need dialysis a few times a week.. most limited liability plans just wont cover them.

So the first thing to understand is just what is covered and what is not.

The second thing is: "Is the coverage realistic?". The better limited liability plans may cover hospitalization at the rate of $1000 per day up to 150 days. If you have a choice of hospitals, find out what their daily rate is, both for the network you are in if your plan is a PPO or out of network.

For a relatively short uncomplicated stay, your out of pocket with a limited plan may be no worse than a major medical plan with a high deductible. But it could be...

You do not have to fear a limited plan IF you first get it from a reputable firm and get a reputable agent.  If an agent comes to your home responding to a lead and offers you a really low cost plan, this may be your first clue this is a limited liability plan. Best to always deal in person if possible and start by asking to see the license.  See if you have a 10 day free look as you do with major medical, because being un reselected, your limited liability plan may have NO provision for a refund.

Now that you are a bit educated.. you can look at both and if the limited liability plan is the one you need based on un-insurability with a major medical plan or prohibitive costs, at least you now have a guide for buying.