Every PPO Plan has an annual deductible, but few people understand exactly how it works.
The annual deductible is one of the basic details of a PPO policy and you may even know what the dollar amount of the annual deductible of your policy is. But, often the language used to outline the policy coverages is wordy and confusing and the majority of people are taken by surprise when they have to pay more for their health care costs than they first thought.
So, just what is the Annual Deductible?
The annual deductible of a policy is the amount you must pay each plan year before the insurance company will help you pay for your health care costs.
There can be an exception to this rule with some policies. There 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. Understand though that these co-pays do not count towards your annual deductible. The most common services that this 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 the year. After you have paid that $1,000 the insurance company would contribute to your costs as outlined by your policy. With most PPO plans, this usually means that you will be responsible for a percentage of the fee negotiated by the insurance company with the service provider and the insurance company will 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.
Don’t let your annual deductible take you by surprise. Know what it is and how it is structured.