Basic Insurance Policy Terms
You may have heard many of the insurance policy terms but may not know how they apply to you. Some, such as deductible or co-pay, may sound only too familiar while others such as out-of-pocket, may sound a bit foreign. Let’s look at these terms with examples of how they may impact you.
The deductible is a specific amount you must pay yearly in medical expenses before your insurance company will begin to cover its portion of your claims. The deductible is one factor which will influence the over-all cost of your medical insurance policy; the higher your deductible, the lower the cost of the policy and vice versa.
You purchase medical insurance for many reasons. One reason is to allow your insurance carrier to act as your medical accountant. This includes applying the deductible, co-payments (co-pays), out-of-pocket and lifetime maximums to the claims they receive.
You may run into healthcare providers who will try to work around your insurance company with the hope of being paid quicker. They may try to convince you to pay your deductible directly to them. Don’t do it!!
Remember, it is the responsibility of your insurance carrier, not your responsibility, to apply your deductible to the claims it receives in the order they are received!
How it works:
For the sake of this example, we will say that you have a $1000 deductible. We will also say that, in January, you had the misfortune of being involved in a terrible skiing accident. You were taken off the hill by paramedic ambulance, and seen by the Emergency Room physician (ER, also known as the "Emergency Department/ED"). The Radiologist’s report confirmed the ER physician’s belief that your fractured leg would have to be surgically repaired (so much for your perfect weekend in Aspen).
You may think that your deductible will be applied to the paramedic’s bill since they were the first to provide you with care; however, your insurance carrier received claims from the ER physician first so your deductible was applied to that claim, and then to the others as they are received.
What does it mean to have your deductible "applied" to a claim?
Applying your deductible is like making a payment. The amount of the claim that is applied towards your deductible is from the contracted rate based on your insurance policy terms, not the total amount of the claims. In this case, we will say that your ER physician’s total claim was for $950 but, his/her contracted rate was only $500 based on your insurance policy terms.
Your insurance carrier did the medical accounting and subtracted the contracted rate of $500 from your $1000 deductible. This means you will have to pay the full $500. It also means you have $500 left to pay in claims before your insurance carrier begins to pay its percentage of medical expenses.
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