How Do Deductibles Work with PPO Health Insurance Plans?

One of the key components of any health insurance policy is the deductible. This is the amount you must pay out-of-pocket before your insurance benefits kick in. Deductibles work a bit differently with Preferred Provider Organization (PPO) plans compared to other types of policies.

This article will explain how deductibles function in a PPO, how they are calculated, and strategies to minimize your costs.

What is a PPO Health Insurance Plan?

A PPO is a type of health plan that gives you flexibility in choosing healthcare providers. You can visit any doctor or facility you want, but you’ll pay less when using the PPO’s network of preferred providers.

Here’s a quick overview of how PPOs work:

• You pay lower rates when you see in-network providers.

• Out-of-network care costs more but is still covered up to allowed amounts.

• You don’t need referrals to see specialists.

• Nationwide provider networks offer lots of choice.

• Premiums tend to be moderate compared to HMOs or high deductible plans.

PPOs represent a middle ground between restrictive HMOs and more expensive indemnity plans. The tradeoff is you have deductibles and coinsurance that don’t exist with an HMO.

How Are PPO Deductibles Calculated?

Unlike HMOs that only charge flat copays, PPOs base your deductible on a percentage of your annual salary.

For example, if your salary is $50,000 and your PPO has a deductible of 1.5% of income, your deductible would be:

$50,000 x 0.015 = $750

So your deductible for the year would be $750. Any care you receive is 100% out-of-pocket until you spend $750. Then coinsurance kicks in.

The exact deductible percentage depends on the PPO plan. Some common ranges are:

• 1% to 2% of salary for employee-only coverage

• 2% to 4% of salary for family coverage

The deductible percentages usually increase for family plans to cover added costs. Employers that offer PPOs choose the deductible formulas when designing their plans.

How Do Individual and Family Deductibles Work?

Unlike some other policy types, PPOs have separate deductibles for individual and family coverage rather than a shared deductible.

If you enroll in family coverage, you are responsible for two deductibles:

• Individual deductible: Applies only to care you receive

• Family deductible: Applies to care for your spouse and dependents

You can potentially satisfy both deductibles in the same year if healthcare expenses are high. Or you may only meet one.

For example, say you have the following deductibles:

• Individual deductible: $750
• Family deductible: $1,500

If you incur $750 in expenses for your own care, you satisfy the individual deductible. But your family deductible is still untouched until your dependents have $1,500 in combined expenses.

Some PPOs count care for any family member toward both deductibles simultaneously. But it’s more common for the individual deductible to be distinct.

How Can You Reduce or Eliminate PPO Deductibles?

Some strategies to minimize or avoid PPO deductibles include:

Complete health assessments – Many PPOs provide incentives like reduced deductibles if you complete routine health questionnaires or screenings.

Enroll in an HSA – A health savings account allows tax-free savings to pay for out-of-pocket care below your deductible. HSAs pair well with high deductible PPOs.

Use preventive care – Preventive services like annual checkups and cancer screenings are covered at 100% by law, with no deductible. Take advantage of these no-cost services.

Comparison shop procedures – If you need a procedure like an MRI, compare costs at different in-network facilities. Pick the lowest cost provider to drain your deductible as slowly as possible.

Negotiate bills – If you get a high bill under your deductible, negotiate directly with the provider for a discount or payment plan to reduce the impact.

Fund an FSA – An FSA or HRA through your employer lets you set aside pre-tax money to pay healthcare costs below your deductible.

What Medical Costs Count Towards a PPO Deductible?

Virtually all medical and prescription drug costs accumulate toward your annual PPO deductible except for:

• Preventive care services, immunizations, and annual checkups

• Copays for doctor visits and prescriptions (flat fees paid regardless of deductible)

• Charges above usual and customary rates from out-of-network providers

• Penalties like costs for failure to obtain preauthorization (if required)

• Excluded services listed in your policy documentation

Otherwise, any condition-related care like diagnostic tests, imaging, surgery, hospitalization, mental health services, and medications add to your deductible.

Once the deductible amount is reached, coinsurance kicks in until you reach your out-of-pocket maximum. Some PPOs also charge flat copays per visit that don’t count towards the deductible.

Do All PPO Plans Have Deductibles?

While deductibles are common, not all PPOs have them. You may be able to find a plan with:

• No deductible but higher premiums and coinsurance

• A low deductible like $250 or $500

• A limited “per cause” deductible you only pay once per condition per year

• A separate lower deductible for prescription drugs

• No deductible for care from in-network providers

Plans with minimal or no deductible generally cost more in payroll deductions. But they can be worthwhile if you use healthcare frequently.

Some employers also combine a PPO with an attached Health Reimbursement Arrangement (HRA). The HRA provides funds to pay initial medical costs before you reach your deductible.

Talk to your employer’s benefits coordinator to learn if alternatives to high deductible PPOs exist. You may be able to customize your plan design.

How Can You Track Expenses Towards Your PPO Deductible?

To manage costs with a PPO deductible, track your accumulated expenses carefully. Here are some tips:

• Review your insurer’s explanation of benefits statements after each claim.

• Check your provider bills to see if deductibles apply and how much you owe.

• If your insurer has an online member portal, check it regularly to view deductible totals.

• Use the claims data in your Explanation of Benefits to maintain your own spreadsheet.

• Ask for a deductible status update from your insurer anytime you receive medical services.

• Evaluate if care can wait until the new year if you are close to meeting your deductible in the fall.

Monitoring deductible thresholds helps avoid surprise costs at the point of care. You can better plan your expenditures to soften the impact.

Frequently Asked Questions About PPO Deductibles

Answers to some common questions about how deductibles work with PPO insurance:

Do PPO deductibles renew each year?
Yes, PPO deductibles reset to zero at the start of each new plan year, typically January 1. You begin paying out-of-pocket again each year until meeting a fresh annual deductible.

Does my deductible count towards my out-of-pocket maximum?
Yes, deductible costs do accumulate towards your annual total out-of-pocket maximum. Once you reach the maximum, insurance covers 100% of additional care.

Do I have just one family deductible in a PPO?
No, PPO family plans have separate individual and family deductibles. You must satisfy both until the plan’s standard coinsurance begins.

Do I need to satisfy my deductible before preventive care?
No, the ACA requires all plans to cover designated preventive services at 100% without charging a deductible beforehand.

Can I pay my PPO deductible in installments?
No, the deductible is a total dollar amount you must incur in expenses within the year. There is no installment payment option.

Use a PPO Deductible to Your Financial Advantage

PPO deductibles help lower premium costs but require careful planning when using healthcare services. Track your total expenditures, look for savings, and leverage preventive care to make the most of your benefits.