Most health insurance plans are written with the expectation that all plan members must share in the cost of providing healthcare coverage. A deductible is the portion of the claim that the patient will be required to pay before the insurance carrier will pay anything. The deductible starts over every year.
Let’s use Sample ABC plan for our first example of how the individual deductible is applied.
James E. is a member of ABC plan. He is seen by the doctor and incurs $200.00 in health care costs. Since none of his deductible is met, he is required to pay the full $200.00 upfront.
The claim for $200.00 is submitted to his health plan. They allow the full $200.00 and apply it to his plan deductible thus paying zero.
James is seen again by his provider and again his bill is $200.00. Because he already met $200.00 of a $300.00 deductible, the provider requires he pay $100.00 plus 20% (his plan pays at 80%).
The claim for $200.00 is submitted to his health plan. They allow the full $200.00 and apply $100.00 to his plan deductible. The other $100.00 is paid at 80%.
James is seen for one final visit but this bill is only for $100.00. Because his deductible is met in full, James is required to pay 20% only.
The claim for $100.00 is submitted to his health plan. They allow the full $100.00 and since his deductible is met in full, his plan reimburses 80% to the provider.
The deductible is all about timing. For example
Mr. Smith is in the office and his health carrier is called to verify eligibility and benefits. We learn that he has an 80/20 PPO plan with a $250.00 deductible. None of his $250.00 plan deductible has been met for this year. Mr. Smith insists that because he saw his Chiropractor three times last week, his deductible is now met, in full. We apologize, explain our policy for upfront payment and assure him that after the claim is processed, if a refund is due it will be handled immediately. He unhappily pulls out his credit card and is charged $250.00 plus his 20% coinsurance amount.
He sees the doctor, incurs $500.00 in charges and his claim is billed to his health plan.
Although, Mr. Smith saw the chiropractor 3 times last week, how the deductible is applied is all about timing. Because our claim reached his health carrier BEFORE the claim from the chiropractor, the $250.00 deductible was taken from the claim we billed, not from the claim from the Chiropractor.
The amount he was required to pay upfront was correct and no refund was due from us. His chiropractor may owe him a refund.
The way the deductible is applied is all about timing because the deductible will be taken from the claim that is processed first. Date of service may have nothing to do with how the deductible is applied, unless the claim with the earlier date of service is processed first.
Please note that the allowed amount is critical to understanding what amounts may be applied to the plan deductible, what may be paid and even which portion is not covered.
I discuss allowed amounts in detail in Chapter 7 - Reimbursement.