13.3.1 Deductibles
Everyone knows what a deductible is. It is a form of payment that enables insurers to help hold down premium rates and eliminate small claims, but you may not know that there are actually three types of deductibles under major medical expense plans.
- Flat
- Corridor
- Integrated
Flat Deductibles
A flat deductible is a stated amount that the insured must pay before policy benefits become payable. This is the deductible that most people are familiar with.
Corridor Deductibles
A corridor deductible works with supplementary policies in conjunction with a basic medical expense policy. The basic medical expense policy will pay its limit, then the deductible will come into play, and finally, the supplementary policy will pick up the remainder.
The corridor deductible is usually a fixed dollar amount per loss and applies in the transitional area between basic coverage and major medical expense coverage. Basic policy benefits are paid first. When the basic policy benefits are exhausted, the corridor deductible is applied. Then the major medical plan benefits are paid.
Integrated Deductibles
An integrated deductible works in conjunction with supplementary policies as well; however, whatever amount the basic medical expense covers is applied to the deductible.
For instance, if Pam's basic medical expense coverage pays $400 and her deductible is $500, she is only responsible for $100 (the difference) before the supplementary policy coverage kicks in.
Under the calendar year deductible method, the deductible renews every year. If the deductible is $500 and in January medical costs were in excess of $500, the deductible would be satisfied for the rest of the calendar year.
Causes of Loss = Each incident of sickness or injury
Using the same figures under the per cause method, the insured would be responsible for the $500 incurred in January and also for any other costs of $500 or less per incident. So if in February the insured incurred another medical expense bill of $600, the insured would again have to pay the $500 and the insurance would pick up the remaining $100.
