The Annual Deductible of a PPO Health Insurance Policy
One of the basic details of a PPO policy is the annual deductible. Do you know what the dollar amount is for the annual deductible on your policy? Even if you do know the amount, the language used to outline the policy coverages is often confusing and the majority of people are taken by surprise when they have to pay more for their health care costs than they believed they should.
So, what is the definition of an Annual Deductible?
The annual deductible of a policy is based on the plan year and is the amount you must pay before the insurance company will start to help you pay for your health care costs.
Note that some policies do work a little differently. These types of policies have a set co-pay amount for specific services and these co-pay amounts are lower than you would pay without the coverage. However, these co-pays do not count towards your annual deductible. The most common services that this rule applies to are office visits, generic drugs and preventative care.
An Example of How the Annual Deductible Works:
If your annual deductible is $1,000, you would be responsible for paying for $1,000 worth of health care expenses (excluding co-pays as mentioned above) for that plan year. After you have paid for $1,000 of health care costs yourself, the insurance company would begin to contribute to your costs as defined by your policy. With most PPO plans, this usually means that you will have to pay a percentage of future costs. The insurance company will negotiate the cost of the service with the service provider (called the negotiated fee) and you will be responsible for a percentage of that negotiated fee. The insurance company will then pay the balance. Note that most policies include a capped annual out of pocket maximum.
There are two basic types of annual deductibles, individual and family. Individual deductibles apply separately to each covered person. With an individual deductible, each member must meet the annual deductible before the insurance company contributes to the costs of that individual.
Family deductibles apply to all covered members of a family. Depending on the guidelines, meeting the deductible can be shared by two or more family members.
This leads us to one of the most common family deductible formats, the two member max.
The Two Member Max Clause:
If you have a policy that covers more than one person, your policy may have a footnote on the annual deductible that says “2 member max”. This means that two of the people covered on the policy must each meet the deductible before the insurance company will help pay for your health care costs.
If just one person meets the deductible, the insurance company will contribute to that person’s health care costs. Note that this person’s future expenses do not count towards any other member’s deductible. The second person must meet their own deductible before the insurance company will contribute to their health care expenses.
If there are more than two people covered under the policy, once two of the members have reached the deductible, the insurance company will contribute to all members’ health care costs.
I hope this overview helps you to understand how the annual deductible works. Know what your annual deductible is so you won’t be surprised at what costs you are responsible for.
With this and with any other details of your policy, if you don’t understand something in your policy, consult your insurance agent.
