Benefits Basics: Understanding Your Plan’s Deductible

When choosing or designing a health plan for your employees, the deductible is the core provision that describes today’s plans. It’s rare for a plan to have no deductible!  From a financial perspective, the higher the deductible, the lower the premium. This is because the deductible puts the claim responsibility on the insured and reduces the risk to the insurance company. How the deductible operates varies amongst insurance carriers, as well as from plan to plan within carriers.  The details behind the deductibles are not always evident in spreadsheets and proposals, so it’s important to ask your broker or sales representative exactly how the deductibles work in order to make an informed decision on what plan to purchase. Here are the deductible features to understand:

INDIVIDUAL VS. FAMILY: 

There are different deductible levels for those employees covering themselves as an individual versus those including family members.  Regardless of how many family members are covered, the family deductible is most commonly twice the individual amount, but check the plan materials to be sure. Some family deductibles are described in plan materials as an “aggregate” deductible or “non-embedded.” This means that the family deductible can be satisfied by any combination of contributions from family members and can even be met from claims from just one family member.   As an example, in a plan with an aggregate or non-embedded $1500 individual and  $3000 family deductible, the full $3000 would have to be met in order for the deductible to be satisfied.  One family member could meet the deductible for the entire family with their claims.  A “separate” or “embedded” deductible limits the contribution any one family member can make to the family’s deductible to the individual amount.   Using our example, in a separate or embedded deductible plan, no family member can contribute more than the $1500 individual amount towards the family deductible.

IN and OUT OF NETWORK DEDUCTIBLES: 

When considering a plan that provides coverage both in and out of the carrier’s network, the plan will often have different deductible amounts for in-network versus out-of-network claims. If an employee uses both in and out of network providers, do these different deductibles credit each other?

Check your plan materials to be sure. The deductible in most small group (50 or fewer employees) plans do not credit each other.  In these plans, in- and out-of-network deductible claims are tracked separately, almost as if there are two separate health plans.  Large group plans can vary.

WHAT TIME PERIOD IS THE DEDUCTIBLE TRACKED OVER?  

The choices here are whether the deductible is calculated on a calendar year basis or a plan or contract year basis.  Most group plans are run on the contract year while individual policies are on the calendar year. It is important to make your employees aware of this, especially those joining your plan after the start or the renewal date of your plan year, as they will have a shorter time period for the deductible to be incurred.   

IS THE DEDUCTIBLE REQUIRED BEFORE THE INSURANCE COMPANY PAYS ANY CLAIMS?

Plan designs vary, so you should review the detailed benefit summaries to find the answer. Health Savings Account (HSA) qualified plans, as required by the IRS, always require the deductible to be met before claims are paid.  Other plans are a hybrid design where some benefit categories require only a copay such as for an office visit, while other benefit categories require the deductible to be met first before the insurance company pays a portion of the claim. 

IS THERE AN EXCEPTION FOR PREVENTIVE CARE? 

Yes, there is!  Thanks to the Affordable Care Act, preventive services are always covered in full outside of the deductible and copays when you use in-network providers. Some small group plans even include pediatric dental and vision outside of the deductible.  

ARE THE MEDICAL AND PRESCRIPTION DEDUCTIBLES COMBINED?

HSA plans will always have the medical and pharmacy deductibles combined. Other plans can be designed with one deductible for the medical and a separate one for the pharmacy.

 

On a final note, while deductibles are being incurred, employees still get the benefit of the insurance company negotiated pricing when using in-network providers. If a claim is applied to the deductible, the employee would still only owe up to the allowed amount and not the full charge.

When considering which employee health plan is right for you, it’s imperative to do your research to ensure the plan is right for you and your employees. Use the above pointers as guidelines when discussing your options with your broker or sales representative!