As agents, we understand the insurance world can be confusing, and it’s our job to help you understand what your options are and more importantly, what your insurance terms mean. Today we’d like to focus on deductibles, what they are and how it impacts your plan/policy.
An insurance deductible is the amount of money you will pay an insurance claim before the insurance coverage kicks in and the company begins to pay you. These deductibles have been included in insurance contracts for years. It’s the amount of money you are responsible for paying when seeking coverage for medical care or another sort of disaster, such as a car accident.
Your deductible could come in the form of a dollar amount or listed as a percentage off the total coverage amount. If you have a deductible on your medical policy or property, you have to come up with the money before a claim gets paid. Once paid, the insurance company pays the rest of the claim value up to the policy limits in your contract. For example, if you have need a medical procedure that will cost $14,000 and your deductible is $1,000, you are responsible for paying $1,000 and the insurance company will pay the remaining $13,000.
Seems simple enough, right? Well with health insurance, there are at least four different types of deductibles, that vary by the type of policy — and sometimes even within the same policy:
- Plan Year Deductibles
- Calendar Year Deductibles
- Benefit Period Deductibles
- Specific Deductibles
Plan Year Deductibles
As you may guess from the name, a plan year deductible starts at the beginning of the policy year and resets twelve months later on the date the policy began. An example — your health plan has a $3,000 deductible and es effective April 1st. Your deductible would begin on April 1st, and once satisfied, would not be owed again until April 1st of the next year. If you meet your deductible in August, however, you will not have to pay toward the deductible again if you have another big claim in February of the next year.
This all sounds great in theory, especially for employees, however most health plans don’t operate this way, which can cause confusion when switching from one carrier that has a plan year deductible to another plan whose deductible re-sets on a specific date (i.e., January 1st). It may also be difficult for new employees who have already met some or all of their deductible on a previous plan.
Calendar Year Deductibles
A much easier method many health carriers use is the calendar-year deductible, which starts at the beginning of each year, regardless of when the plan’s renewal date is. What makes this a more frequent choice, especially for employees is the uniformity. A new employee who has a calendar-year deductible plan with a previous job can usually get credit for any deductible already met, and all employees would be able to get this when a company switches from one carrier to another.
For individual health care coverage, most plans have a calendar-year deductible as well.
Benefit Period Deductibles
Instead of a calendar-year deductible like most group or individual plans, Medicare Part A has what’s called a “benefit-period deductible”, where the policy holder meets a new deductible each benefit period. For example, if a Medicare beneficiary is admitted to the hospital and then released for sixty days or more and then goes back into the hospital, that beneficiary will have to meet a new deductible. Since the Medicare Part A deductible is only $1,484, it’s less than any other deductible on most group and individual health plans, therefore it may hit multiple times in one year. Definitely a perk for a Medicare Advantage plan! While some have this deductible, many Advantage plans also have a calendar-year deductible that only applies once a year. And many Medicare supplements, including the ever-popular Medigap Plan G, eliminate the Part A altogether.
Lastly, some health plans have a separate calendar-year deductible for specific benefits. Prescription benefits on a group health plan is a great example; while prescriptions are covered by a flat co-payment on some plans and are subject to the plan deductible on other plans, there are some plans that have a separate, up-front deductible for prescriptions. Let’s say you have a prescription plan, and your prescription co-payments may not kick in until you have paid the first $300 of prescription costs.
We know this is a lot of information at once, but don’t worry — at FHI we are always happy to explain the details of your plan and exactly what is covered and what you’re responsible for out of pocket. We are proud to be the number one resource for all-insurance related inquires in the Coral Springs and Parkland are of South Florida. Questions? Give us a call — our agents are ready and waiting to help!