Health Insurance Navigator

By Lisa Zamosky

By the time Thanksgiving has come and gone, most people who get their health insurance at work have already chosen their health plan for the upcoming year.  As I discussed in a previous post, selecting the right plan requires you to take a number of factors into consideration, including how frequently you go to the doctor and how much you’ll be required to spend on deductibles, co-pays and co-insurance.

Also important is to understand the details of how your plan operates. The following question illustrates how nuances can have a big impact on your wallet:

I’ve just signed myself, my wife and kids up for health insurance through my employer for 2012. Do I have to meet the family deductible before my insurance starts paying anything or can one person in my family meet the individual deductible?

The short answer is: it depends. The type of plan you have, as well as how your employer (assuming you get your insurance through work) has structured benefits, will impact how your deductible is met.

According to Michael Thompson, of PricewaterhouseCoopers’ Health and Welfare Practice, most plans have an individual and a family deductible. Satisfying your deductible generally works like this:

PPOs and Deductibles

With a traditional PPO-style plan (preferred provider organization), if one person in your family meets his or her individual deductible, benefits will kick in for that person. “Under the traditional PPO approach, the individual would be in benefit even though the family deductible has not yet been met,” Thompson says.

In any case, you won’t pay more than the total family deductible before insurance begins to pick up the bill for care, meaning if you have five members in your family, each member won’t need to meet the individual deductible.

Thompson offers this example:

Individual Deductible = $1500, Family Deductible = $3,000

One family member has $2000 in eligible expenses and another has spent $100.

With a traditional PPO, the calculation goes like this:

$2000 (your medical costs) – $1500 (your deductible) = $500 (the amount your insurer will now cover).

High-Deductible Plans

It’s a different story with high deductible, HSA-qualified plans. In these arrangements, if you’re covering a family, it’s the larger family deductible (as opposed to the individual deductible) that must be met in order for your benefits to take effect. “If you have a $1,500 individual deductible and a $3,000 family deductible, the plan won’t pay any expenses before the aggregate expenses of the family exceed $3,000,” Thompson says.

In some cases, Thompson says, employers offering health insurance may elect to treat their deductibles the same with all plan types, which is why you always need to check to be certain how your benefits operate to avoid expenses you didn’t plan for.

Your Turn: Have you ever been caught off guard by the rules of your health plan? What details do you wish you’d known before choosing insurance coverage? Discuss in the comments below.