Seminar Fact Sheet: s and o-insurance The & S policies that include the prescription drug reimbursement policies and dental policies come with a deductible and co-insurance. These deductibles and co-insurance factors are used by insurers to bring down the cost of claims and, thus, the premiums. The deductible is an annual deductible, which means that it applies every year. The deducible is treated in different ways by different insurers. For the purpose of this course, we will assume that a plan has a specified single deductible and a family deductible. These are usually in group plans. The single deductible is the amount that is deducted from the first claim made by the covered member during the year. For a family the maximum that is deducted from all family members together is the family deductible. So, if a plan has a single deductible of $50 and a family deductible of $100, the single deductible will apply to the first two members of the family who make a claim during the year. Let us work the following example: Let us assume that a plan has a $50 single deductible and a $150 family deductible. Let us also assume a co-insurance factor of 80%. (This means that the single deductible will be used for three family members. If there are more than three members in the family, the single deductible of $50 will apply only for the first three members of the family.) First claim of the year for the oldest child, Tom, of plan member, John: $200 laim = $200 status after this claim: used up to this claim: $50 remaining: $100 Second claim of the year is again for Tom, the oldest child of the plan member, John for: $300 s this is Tom s second claim and the single deductible was used in his earlier claim, there will be no deductible applicable to this claim. laim = $300 mount after deductible = $300 mount reimbursed = $300 x 80% = $240 opyright 2013 Oliver Publishing Inc. ll rights reserved. 1
status after this claim: used up to this claim: $50 remaining: $100 Third claim of the year for the plan member John: $200 laim = $200 ($50 deductible applies) status after this claim: used up to this claim: $100 remaining: $50 Fourth claim of the year for the spouse of plan member, Mary: $300 laim = $300 ($50 deductible applies) mount after deductible = $250 mount reimbursed = $250 x 80% = $200 status after this claim: used up to this claim: $150 remaining: $0 Fifth claim of the year for the younger child, Susan: $200 No more deductible for the rest of the year as family deductible has been used up. mount after deductible = $200 mount reimbursed = $200 x 80% = $160 o-ordination of Benefits When a person is covered in more than one plan, the maximum they can be reimbursed by all plans put together is the amount of their expense. There are special rules that address this situation. These rules are called the coordination of benefits rules. plan that has a coordination of benefits clause checks to see the amount that has been reimbursed against the claim by another plan and will reimburse only to the amount due against the claim. Let us assume that John s family is covered by his own plan and that the family is also covered by his wife, Mary s, plan. ssume the following: John s plan: $50 single deductible and $100 family deductible with 80% co-insurance Mary s plan: $50 single deductible and $100 family deductible with 100% co-insurance ssume John was born on 1 st October and Mary on 5 th July. First claim of the year is for John for $300. The first payor is the plan where John is the primary member and the second plan is the plan where he is a secondary member. Therefore, the first payor for this claim is John s plan. opyright 2013 Oliver Publishing Inc. ll rights reserved. 2
Rule : When both plans have OB, the first payer is the plan where the claimant is the member and the secondary payer is a plan where the claimant is a dependant. laim 1 John Mary laim $300.00 $300.00 $50.00 $50.00 $250.00 $250.00 laim 1 John $300 80.00% 100.00% $200.00 $250.00 Out-of-pocket The secondary laim B $300.00 reimburses the Reimbursed $200.00 lesser of Steps $100.00 B and =$100 First Payor: laim = $300 mount after deductible = $250 mount reimbursed = $250 x 80% = $200 Out-of-pocket = $300 $200 = $100 Secondary payor: Mary s plan (will calculate how much it would have reimbursed had it been the first payor) Second Payor: laim = $300 mount after deductible = $250 mount reimbursed = $250 x 100% = $250 Mary s Plan will then check and pay the lesser of the amount it would have paid as first payor or the outof-pocket. In this case $100 is the out-of pocket amount. So it reimburses $100. opyright 2013 Oliver Publishing Inc. ll rights reserved. 3
ssume that the second claim is for Mary for $200. laim 2 John Mary laim 2 Mary $200 laim $200.00 $200.00 $50.00 $50.00 $150.00 $150.00 80.00% 100.00% $120.00 $150.00 The secondary Out-of-pocket reimburses the laim B $200.00 lesser of steps Reimbursed $150.00 B and =$50 $50.00 Mary s plan is the first payor: First Payor: laim = $200 mount reimbursed = $150 x 100% = $150 Out-of-pocket = $200 $150 = $50 Secondary payor: John s plan (will calculate how much it would have reimbursed had it been the first payor) Second Payor: laim = $200 John s plan will then check and pay the lesser of the amount it would have paid as first payor or out-ofpocket. In this case $50 is the out-of pocket amount. So it reimburses $50. Now the $100 family deductibles have been used up in both plans. What happens if the third claim of the year is for their child Tom, who has a claim for $300? The rule is when a dependent member of both plans makes a claim, the plan of the parent whose birthday falls first in the year is the first payor. Since Mary was born on 5 th July and John on 1 st October, Mary s plan is the first payor. opyright 2013 Oliver Publishing Inc. ll rights reserved. 4
Rule : When the claim is for the children, who are dependants in both plans, the claim goes to the plan of the parent whose birthday falls first in the year. If birthdays are the same, it goes in the alphabetical order of names. laim 3 John Mary laim $300.00 $300.00 $0.00 $0.00 $300.00 $300.00 80.00% 100.00% $240.00 $300.00 laim 3 Tom $300 The secondary Out-of-pocket Birhdays reimburses the laim B $300.00 John 01-Oct lesser of steps Reimbursed $300.00 Mary 05-Jul B and = $0 $0.00 Mary s plan is the first payor: First Payor: laim = $300 mount after deductible = $300 mount reimbursed = $3000 x 100% = $300 Out-of-pocket = $300 $300 = $0 Secondary payor: John s plan (will calculate how much it would have reimbursed had it been the first payor). Second Payor: laim = $300 mount after deductible = $300 mount reimbursed = $300 x 80% = $240 It will then check and pay the lesser of the amount it would have paid as first payor or the out-of-pocket. In this case $0 is the out-of-pocket amount. So it reimburses $0. Personal Notes: opyright 2013 Oliver Publishing Inc. ll rights reserved. 5