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Understanding Your Benefits

 

Confused about the terms used to describe your health benefits? You’re not alone! Recent studies suggest most consumers with health coverage don’t fully understand health insurance terminology.

Therefore, we created this page to describe, in every day language, the terms that are most important for you to know. This will help you take full advantage of this valuable benefit provided by your employer.

Please Note: These descriptions are offered as illustrations only and do not include all coverage information, including coverage limitations. You should consult your Summary Plan Description (SPD) for complete plan details. In the event of an inconsistency between the information on this site and the information contained in your SPD, the SPD will in all respects control and govern.

SUMMARY PLAN DESCRIPTION
PREFERRED PROVIDER ORGANIZATION (PPO)
CO-PAY
DEDUCTIBLE
         Calendar Year
         Hospital
         Emergency Room
CO-INSURANCE
OUT-OF-POCKET MAXIMUM
MEDICAL CLAIMS
         Procedures
         Payments
    

SUMMARY PLAN DESCRIPTION (SPD)

Also referred to as a Benefit Booklet or a Plan Booklet. Most Trust SPDs have “YOUR BENEFITS” at the top of the cover or first page. The SPD describes the benefits available under your insurance plan. This is a very important document. It is the final authority on what benefits you have, what procedures are covered, and what your insurance will pay. Remember, if someone (including an insurance company representative) tells you something about your benefits that is different than what is described in the SPD, the SPD is always right and overrides anything else you may have been told.

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CO-PAY

Under certain plans, this is the amount you pay when you visit your doctor or a specialist. For example, if your co-pay is $20, you will pay $20 every time you go to the doctor’s office. However, that is all you will pay for the visit, which is a great benefit since the actual cost can range from $90 to over $200. There may be additional charges if the doctor performs tests (such as blood work) or other procedures while you are at his or her office. These charges will typically be subject to a deductible and paid according to the terms of your policy.

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 DEDUCTIBLE

Calendar Year Deductible (See also: Hospital Deductible)

Similar to auto or homeowner’s insurance, a deductible is the amount you pay for a covered charge before the insurance company pays. The deductible amount is specified in your SPD and it resets (you start paying it over again) every calendar year.

There are certain charges that don’t apply to your deductible. For instance, if you are in a plan where you pay a co-pay for a physician visit, then all you pay is the co-pay when you see your doctor – there is no deductible. Also, if you’re in a prescription drug plan where you pay a co-pay every time you fill a prescription, then all you pay is the co-pay and no deductible. In both of these examples, the amount you paid in co-pays does not apply toward your annual deductible.

There are also certain services that may be exempt from a deductible. For example, if you use a LabOne facility to have Lab work performed (such as blood draws and analysis) you will not pay a deductible for those services (under most plans). However, if you have lab work performed at another facility besides LabOne, it will be subject to a deductible. There are also certain preventative or wellness services that may be exempt from a deductible, such as pediatric vaccines. Please Note: these examples are used simply for illustrative purposes. You should consult your SPD for a description of your deductible and what charges apply to that deductible.

For those in PPO plans, pay close attention to in and out-of-network benefits since your deductible may be higher if you use an out-of-network provider.

Here is an example of how a deductible works:

The doctor bills the following:

Office Visit: $ 100
Minor Surgery: $ 300
Total: $ 400

You pay the following:

Office Visit: $ 20 (co-pay)
Minor Surgery: $ 200 (deductible)
Total: $ 220

The remaining $180 will be covered by your insurance company according to your policy terms.


If you visit the doctor a second time that year and have the same procedure performed, you will pay a co-pay and the entire $300 will be covered by insurance (subject to policy terms) since you’ve already met your deductible for this year.


What About Family Coverage?

Deductibles can get more complicated when you have family coverage. Your insurance will have one of two types of family deductibles:

1. A single family deductible (one deductible for the whole family), or
2. An individual and a family deductible

The single family deductible is the easiest to understand. In this case, your family and the medical charges they incur are looked at as one. The family deductible is applied against all of these charges, and once it is met (by either one person or everyone in your family) the remaining charges are covered by insurance, subject to policy terms.

For example, you have a single family calendar year deductible of $1,500. Each family member incurs covered charges that apply to your deductible in the following order.

ChargesTotal Apply to Deductible Apply to Insurance
1st Charge: You$ 800$ 800$ 0
2nd Charge: Spouse$ 200$ 200$ 0
3rd Charge: Son$ 600$ 500$ 100
4th Charge: Daughter$ 400$ 0$ 400
Total$2,000$1,500$500

You pay the first $1,500 of these charges as your deductible and the insurance company covers the remaining $600 subject to policy terms and co-insurance.

If you have an individual and family deductible, then the insurance company tracks the deductible separately for each individual in your family. Once an individual meets his or her deductible, any additional expenses (for that individual only) will be covered by insurance subject to policy terms. These individual deductibles are also combined into a family deductible. However, the amount applied to the family deductible by each individual can not exceed the individual deductible amount.

For example, you have a family calendar year deductible of $1,500 with individual deductibles of $500. Each family member incurs covered charges that apply to your deductible in the following order.

ChargesTotal Apply to Deductible Apply to Insurance
1st Charge: You$ 800$ 500$ 300
2nd Charge: Spouse$ 200$ 200$ 0
3rd Charge: Son$ 600$ 500$ 100
4th Charge: Daughter$ 400$ 300$ 100
Total$2,000$1,500$500

Although the deductibles are tracked individually, the most you will pay in deductibles is the family limit of $1,500. In this example, since the family deductible has now been met, any more covered expenses incurred by this family will be covered by insurance, subject to policy terms. This is true even if the spouse (who has not met the individual deductible) incurs the next expense.

The advantage to this type of arrangement is that charges may be applied toward your insurance faster than under a single family deductible. For example, consider that if only you and your spouse incurred covered charges in the above example for a total of $1,000, this would have all been applied to your deductible under the single family deductible. However, with an individual AND family deductible, only $700 would have applied to your deductible and the rest covered by insurance subject to policy term


  

Hospital Deductible (See Also: Calendar Year Deductible)

In addition to a calendar year deductible, your health plan may also have a Hospital Deductible. There are two types of Hospital Deductibles. Your plan may include one or both of these types.

In-Patient Deductible

This is an additional deductible you will pay if you are admitted to the hospital. For example, if your in-patient deductible is $300, you will pay the first $300 of covered hospital charges. Covered charges above that will then be applied to your calendar year deductible. Once that is met, covered charges will be paid by insurance subject to policy terms.

This is NOT only paid one time each calendar year. It is incurred each time you are admitted to the hospital. In addition, the amount paid toward the in-patient deductible does not apply toward your calendar year deductible. HOWEVER, it does apply toward your out-of-pocket maximum.

The lesson here is to opt for out-patient procedures where practical and as recommended by your doctor to avoid paying this deductible.

Emergency Room Deductible

This is an additional deductible you will pay when you visit the emergency room. For example, if your emergency room deductible is $100, you will pay the first $100 of emergency room charges. Covered charges above that will then be applied to your calendar year deductible. Once that is met, covered charges will be paid by insurance subject to policy terms.

Similar to the in-patient deductible, it is not based on a calendar year and is incurred each time you visit the emergency room. However, this deductible will not be charged if you are admitted to the hospital during your visit to the emergency room.

The idea is to encourage you to only use the emergency room for emergencies. You can almost think of this deductible as the co-pay you will pay to visit an emergency room physician. All in all, your health (and your pocket book) is best served by establishing a physician-patient relationship with a Primary Care Physician or Internist, and seeing them for most common illnesses, such as flus and viruses.

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CO-INSURANCE

Co-insurance is usually expressed as a percentage, for example 70%. This indicates the percentage of a covered charge that your insurance company will pay after your deductible is met. In this example, they will pay 70% of the charge and you will pay 30%. This is also sometimes expressed as: 70/30 co-insurance.

Here is an example of how co-insurance works:

Your insurance coverage includes a $20 co-pay, a $200 deductible and 70/30 co-insurance.
You visit your doctor and he or she performs minor surgery (such as removing a precancerous mole) while you are in the office. This is your first doctor visit of the year and nothing has been applied to your deductible.

The doctor bills the following:

Office Visit: $ 100
Minor Surgery: $ 300
Total: $400

You pay the following:

Office Visit: $ 20 (co-pay)
Minor Surgery: $ 200 (deductible)
Co-Insurance: $ 30 (30% of the remaining $100 charge)
Total: $ 250

 

If you visit the doctor a second time that year and have the same procedure performed, you will pay a $20 co-pay and $90 in co-insurance (30% of the $300 charge) since you’ve already met your deductible for this year.


 

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OUT-OF-POCKET MAXIMUM (OOP)

This is the most you will pay in any given year for covered medical expenses not subject to co-pays. In other words, the maximum you will pay for deductibles (calendar year and hospital – if applicable) and co-insurance in a calendar year. Co-pays for office visits and prescription drugs are not included in this maximum. Once you reach the OOP, your insurance pays 100% of covered charges (subject to policy terms and excluding co-pays) incurred for the remainder of the calendar year in which the OOP was reached. At the beginning of the following year, the amount applied toward your OOP goes back to $0 and you start all over again.

Here is an example of an out-of-pocket maximum

Your insurance coverage includes a $300 calendar year deductible, a $200 in-patient hospital deductible, 70/30 co-insurance and a $2,000 OOP. You are admitted to the hospital where you incur $8,000 in covered charges. These are your first medical charges of the year and nothing has been applied to your deductible.

For the first $5,500 of charges you pay:

$ 200 Deductible
+ $ 300 Calendar Year Deductible
+ $ 1,500 Co-Insurance*
* 30% 0f the $5,000 charge left after your Deductibles

Your $2,000 OOP maximum has now been reached

For the remaining $2,500 in charges you pay: $ 0 (subject to policy terms)


What About Family Coverage?

If you have family coverage, you will typically have a family OOP. Unlike deductibles, a family OOP will also not have an individual OOP. The family OOP will be higher than an individual OOP, and it accumulates charges incurred by all family members. Once this maximum is reached, covered charges will be paid at 100% (subject to policy terms) for all family members, except for co-pays.

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MEDICAL CLAIMS

Procedures

In most cases, the providers of your medical services will file a claim with the insurance company.   If they do not, you must:

  1. Provide written notice to the insurance company within 20 days after the date of loss. 
  2. Submit a completed claim form and any other information needed to prove a loss to the insurance company within 90 days after date of loss. 

Whether you or your provider file the claim, the insurer may request additional information to substantiate your loss or require a signed unaltered authorization to obtain that information from the provider.  Your failure to comply with this request could cause your claim to be denied. 

  

Medical Claim Payments

State law requires claims submitted by a provider be paid or denied within 30 days of receipt of an electronic clean claim (i.e., the claim contains all of the information the insurer needs to make a decision) or within 45 days of a clean claim filed by paper.  If the submitted claim is not a clean claim, the insurer must notify the provider within 30 days for an electronic claim and 45 days for a paper claim what further documentation is required.

 

  Principal Financial GroupÒ, The PrincipalÒ and the Principal Financial Group logo are registered service marks of Principal Financial Services, Inc. Used by permission.