Manipulating the Health Insurance Policy Deductible for Cost Savings

With the United States ranked 37th in healthcare, by the World Health Organization, many public officials are beginning to examine key components of the healthcare plans. Whether insured under a PPO, HMO, Indemnity Plans, you may become the victim of financial disaster simply through a deductible maze. So, how do we elaborately work through the maze? Let’s first examine what a deductible is.

A deductible. Commonly referred to as a clause, within an insurance policy, which relieves an insurance company from the responsibility of paying on a claim until a specific dollar loss is reached. In other words, your stated insurance deductible will be the amount you are expected to pay towards your personal healthcare services before the insurance company will begin to pay any portion of your loss. Listed in the Summary of Benefits portion of your policy, the deductible is clearly stated and may range from $50, as seen in dental plans, to amounts in excess of $10,000, as seen in individual indemnity or catastrophic plans. As a general rule, there is a reverse relationship between premium rates and deductibles. That is to say, the higher your deductible, the lower your insurance premiums.

Insurance coverages such as auto, homeowners and Medicare all carry deductible provisions. Medi-gap is generally carried by seniors to aide in covering the deductible expenses imposed by Medicare. However, the auto and homeowner’s policy has no such option for waiving the deductible. It is also important to note that most life insurance, disability and workers’ compensation plans will not impose a deductible upon the insured.

In an effort to control the health claim costs, insurance companies have devised interesting methods for passing the cost of some health expenses back to the consumer. For the lay consumer, deductible language can be confusing. To clarify, let’s examine the definition of each deductible we typically see in a health care coverage plan.

Per Person vs. Family Deductible
Most insurance policies, with deductible provisions, will state the deductible level as a flat calendar year figure or as a percentage of your policy limit. In healthcare plans, the calendar year deductible will apply. Calendar year, of course, refers to the period from January 1st through January 31st of each year. The calendar year deductible is applied on a “per person” basis meaning each individual must satisfy his or her deductible before the insurer will begin paying benefits toward future losses.

To further complicate the policy language, and to the benefit of the insured, insurance carriers added an additional deductible element called the “family deductible”. The family deductible was designed to address the needs of an entire family unit rather than focus on each individual person. Under this provision, the family deductible is referenced as an aggregate figure. The family deductible is considered exhausted when the family’s individual member deductibles, in total, reach this aggregate level. The family deductible can generally be exhausted in any combination of claims but, in some cases, the policy may require that at least one individual exhaust his or her personal deductible.

Carry Over Deductible
In recent years, insurance carriers have begun to offer a policy provision called the “Carry Over Deductible” provision. This policy provision does not create a new deductible. Instead, it is intended to offset costs incurred by the insured. Under this provision, any covered expenses, incurred and applied toward the calendar year deductible in the last quarter (October thru December) of the calendar year, will be carried over and also applied toward the deductible of the next calendar year. In other words, if you incur $500, in covered medical expenses, in the month of November and those charges are applied toward your present calendar year deductible, the insurance carrier will take that same $500 and carry it over to the next year’s calendar deductible. This is a great provision for the insured but many insurance carriers do not readily share the details of a carry over deductible provision. It is up to the insurance saavy consumer to locate the provisions.

With health care costs continue to increase it is necessary that we, as consumers, become educated in the provisions of our insurance plans. Cost cutting and cost saving measures are the key and, with the right information, the educated consumer can obtain adequate coverage in the event of a loss. To ensure cost savings, familiarize yourself with the relationship between deductible levels and premiums, the provisions and existance of a family deductible and the availablity of a carry over deductible provision. In an ideal setting, a low premium/high deductible policy could be purchased, with all family members deferring treatment until the end of the calendar year and then carry over the deductible into the next calendar year. By doing this, you will lower your health premiums, meet your family deductible in one year and then potentially reach that same family deductible for the next calendar year by “carrying over” the same expenses.

It’s about educating yourself as the consumer. For more information on your health plan, review your Summary of Benefits provisions or contact your health insurance company.