Merritt Personal Lines Manual: Deductibles
The deductible associated with a major medical policy has essentially the same function as it does for any other kind of insurance -- whether health or car or homeowners. For example, the insured is responsible for the first $100 of medical expenses related to a hospital visit; then the insurance company pays the excess covered medical expenses.
Most major medical plans will offer a variety of deductibles from $100 to $1,000...or even higher. Some high-risk policyholders -- usually people with histories of health problems -- pay as much as $5,000 or $10,000 deductibles. This is truly catastrophic coverage.
The deductible may be expressed as a calendar year deductible or as a per cause deductible. A calendar year deductible means that the insured satisfies the deductible once in a calendar year.
A per cause deductible is similar to the deductible found in the auto policy. Each time the insured dings a fender, the insured is responsible for a deductible. A per cause deductible basically states that each medical claim the insured incurs will have a deductible requirement. Thus, if the insured had three claims, three deductibles would need to be satisfied before the insurance company would begin to pay benefits.
Example: If Bill has three separate medical claims in a given year and his Allstate policy contains a $250 per cause deductible, then he must satisfy three separate deductibles before Allstate will pay his claim. If his policy with Allstate contains a calendar year deductible, he only has to pay one deductible to cover the entire year.
Another version of the calendar year deductible is the family deductible. Most plans will specify an individual deductible such as $250 and a family deductible equal to two or three times the individual deductible.
So, if the plan had an individual deductible of $250 and a family deductible of $750, after the family incurred expenses totaling $750, there would be no further deductibles for the balance of that calendar year.
Most of the major medical plans contain a deductible carryover provision. If the insured hasn't incurred any claims or received any benefits from the plan, expenses incurred in the last three months of a calendar year may be applied toward the New Year's calendar deductible.
In this case, if Bill has no claims in most of 2002 but does incur $100 of covered medical expenses in November 2002, he can apply that $100 toward the annual deductible for 2003.
Deductibles do have a large affect on the cost of major medical plans. A plan with a $100 deductible will cost considerably more than a plan with a $1,000 deductible. So, if the insured wants to save premium dollars, select a plan with a higher deductible -- it will reduce the cost of the premium.
