When I was a kid, major medical insurance was the tool by which most families covered major healthcare expenses like hospitalizations and surgeries. Health maintenance organizations (HMOs) did not come into play until I was 11 or 12, and Obamacare was decades away from being implemented. My, how things have changed.
I actually remember major medical insurance quite well due to the fact that I was hospitalized with a serious illness as a child. I remember my parents speaking very appreciatively of the major medical plan they had through my father’s employer. But then HMOs came on the scene in the late 1970s. They changed major medical forever. Obamacare ushered in even more changes.
Medical Insurance Was Indemnity Coverage
For all intents and purposes, major medical employee benefit insurance was indemnity insurance 50+ years ago. It operated more like modern car insurance than what we currently know as health insurance. For starters, major medical did not cover things like well-child visits and elective procedures.
Major medical was insurance in the truest sense of the word. Having a major medical policy meant you were insured against financial loss if you had a major medical event requiring expensive care and treatment. An easy way to understand it is this: major medical would pay for hospitalization but not your annual physical.
Other Significant Differences
The major medical of the 1960s and 70s was radically different compared to modern HMOs and Affordable Care Act (ACA) compliant plans. Here are some of the other significant differences, above and beyond major medical being indemnity insurance:
- Subscribers could choose their own providers.
- Provider networks were virtually unheard of.
- Monthly premiums were lower.
- Out-of-pocket expenses were higher.
I remember my parents being very excited when HMOs became a thing. A lot of people shared their enthusiasm. But it did not take long for the national mood to sour. Along with HMOs and managed care came annual premium hikes that put a dent in everyone’s budget. That trend continues today.
HMOs and Obamacare
Consumers could still purchase major medical insurance even after the implementation of HMOs. However, it became extremely expensive by the early 1980s. Most families found the HMO option cheaper, so they went with it while hoping they did not incur major medical expenses their insurance would not cover.
Fast forward to 2010 and all the discussions surrounding Obamacare. By that time, HMOs had become nearly unaffordable to millions of Americans. It was a two-edged sword. People could barely afford their HMOs while they were healthy. Adding extra expenses after a major medical event was enough to break most budgets.
Obamacare changed everything by pretty much eliminating major medical insurance. These days, all ACA compliant health plans – whether offered by private insurance companies or through federal and state exchanges – must offer 10 types of coverage. In essence, those 10 coverage types combine both HMO coverage and major medical.
Self-Funded Companies Not Excluded
It is important to note that companies choosing to offer self-funded health plans are not excluded from the ACA’s minimal essential coverage (MEC) requirements. StarMed, a Nevada-based administrator of self-funded plans, explains that their plans must be compliant with MEC requirements.
The net effect of ACA implementation has been a complete overhaul of America’s health insurance landscape. And yet, even with all the government interference designed to make health insurance more affordable, healthcare costs continue to rise at a rate that outpaces inflation.
I find the whole thing terribly frustrating. Major medical worked well before HMOs were introduced. Forcing HMOs on Americans changed everything for the worse. And unfortunately, the ACA only continues piling on.
