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Understanding California Health Plan Deductibles

Nov 4, 2007
First, the official definition:

Deductible

The amount you must pay for medical services each year before your insurance begins paying.

Now what does that mean?

The deductible is an amount you will pay first before you get help from the carrier. Keep in mind that with a PPO plan, you will get discounted PPO rates which can lower the costs by 30%-60% even though you have a deductible to meet. It's very important to always stay in-network to keep your costs down.

Exceptions to deductibles. Most traditional plans on the market allow copays for office visits and prescription before you meet your deductible. For example, if there is a $40 copay for office visit, you will pay the $40 right away rather than having to pay the full doctor visit subject to the deductible.

Prescription coverage is frequently broken out separately from the main deductible. There may be a separate deductible from Brand name drugs. This means that with a $250 brand deductible and $30 brand copays, you would pay the first (resets each Jan 1st) $250 of your drug costs and then you would get $30 copays afterward. The brand RX deductibles on the California individual family market typically run from $250-$750 depending on the plan. On the California Small group market, the deductibles run from $0 to $250 on average.

Some plans, such as the popular HSA (Health Savings Account) plans do not break out office visit and prescription from the main deductible. The deductible are all inclusive. There are a few other plans on the market which include the office and/or rx as part of the deductible so make sure to look at the plan detail when running your California health quote. The trade off with the HSA plans is that they can be much less expensive. If you are saving $500-$1000 annually or more, that pays for a lot of office visits and medication cost.

Deductible are handled in two ways when multiple family members are on one policy. Except for HSA plans, deductible are usually per person when you have more than one family member on a policy. You will typically see a "2 member max" statement around the deductible. This means that if two people in a family hit their deductible, the other family members do not need to. This is to protect against a catastrophic health situation where every family member had large bills in one year and the resulting out of pocket could be 10's of thousands.

HSA's or Health Savings Account plans on the other hand are cumulative deductibles. You essentially double the single person deductible and the entire family (2 or more people) is working towards one family deductible. Depending on the situation, this works to your favor or not. If one person in a family has large bills, he or she has a larger deductible to meet than if he/she were on an individual deductible plan. However, if multiple members have bills, it can be work to their advantage. Ultimately, the premium savings on an annual basis should more than compensate for the large deductible and that has been the attraction of HSA plans.

Out of network providers. Keep in mind that the discounted PPO rate for a given charge is what will be applied to a deductible if you use out of network providers. For example, let's say you have a $500 deductible. If you have a $200 charge for an out of network provider, and the PPO contracted rate for that procedure is $100, the carrier will typically only apply the $100 to your deductible. Try to stay in-network with PPO plans.

After your deductible is met in a calendar year, with most plans, you then start to share the costs with the carrier for future medical charges in the form of co-insurance or copays according to the benefits of the policy.
About the Author
Dennis Jarvis is a licensed California broker with extensive knowledge of the Individual and Small Group health market in California. California health insurance.
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