Be careful when choosing the deductible for your health insurance plan, as this additional amount must be paid first before benefits actually kick in
Many of the group health insurance plans found in today’s workplace are filled with features designed to reduce the cost of the policies, while at the same time providing appropriate coverage for most foreseeable medical necessities.
One of the most common ways of reducing the monthly cost of such insurance is to require the insured members to fulfill a deductible, or specified payment amount, before the insurance carrier will pick up the remainder of the service cost.
Function
The purpose of an insurance deductible is to reduce the regular premium for the coverage. By requiring the insured member to take responsibility for a larger portion of his medical treatment costs, the insurance company will ultimately be liable for a smaller dollar amount. This simple fact leads to lower monthly premiums for insured members.
Features
Insurance deductibles are structured in one of two ways – either as a percentage of the total cost of treatment, or a fixed dollar amount. Regardless of the deductible type, the insured member is responsible for this portion of the total medical treatment cost.
With many policy types, the insured member must pay this portion before the insurance company will remit the remaining balance to the service provider. It is the responsibility of the patient to make whatever arrangements are necessary with the physician and/or facility in order to facilitate payment of the deductible.
Effects
The effect of the deductible is a significantly lower monthly premium for health insurance policies. By shifting a portion of service providers’ fees to the patient, the insurance company will spend less on members’ treatment.
This type of cost-sharing is becoming a much more common method of addressing the exponential annual increases in health insurance premiums.
Consideration
When evaluating whether or not a health insurance policy that includes a deductible is appropriate, it is essential for the member to calculate whether or not the decrease in monthly premium is worth the potential out-of-pocket expenses in the event that treatment is rendered.
In some cases, the premium reduction is significant, while in other cases the savings is barely identifiable. It is also important that any member who is insured by a policy with a deductible make sure that adequate emergency funds equal to the amount of the deductible are available in case treatment is rendered.
Expert Insight
Most insurance policies that carry deductibles use an aggregate method of calculating the member’s fulfillment of such a cost. The deductible amount listed in the insurance contract is typically an annual total that must be fulfilled by the insured member.
If a member’s deductible for treatment rendered is below the required maximum, then after any subsequent services are provided there will be additional financial responsibility for the member, until he has spent an amount equal to the deductible listed in the policy.
This article is a Twisted Nonsense Exclusive! (08/24/2009)
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