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How PPOs Work: Example 2Published: June 13, 2005 This example shows how the individual and family deductible limits apply. We will assume we have a family of four (John and Jane, and their two children, Tim and Susie) enrolled in a PPO plan with a $200 individual deductible and $600 family deductible.
1. On Jan. 3, John has a doctor's office visit. The doctor charges $110 for the visit, however, the plan has negotiated to only pay $90. Since this is John's first doctor's visit of the year, he still needs to satisfy his deductible. Therefore, John must pay the $90, all of which is credited towards reaching his annual deductible.
2. On Jan. 9, Jane visits her doctor. Since this is Jane's first visit of the year, she is responsible for the negotiated amount of $125, which is applied to her annual deductible.
3. On Feb. 1, John has blood work ordered from his Jan. 3 office visit. The lab bills $140, however the negotiated rate is only $97. Since John has not met his annual deductible, he is responsible for paying the $97. This amount is added to the previous $90 he paid -- for a total of $187 credited to his $200 deductible.
4. On March 3, John sees a specialist and is billed $140, which is again reduced to the negotiated rate of $97. Up to this point, John has paid $187 towards his annual deductible. So he has to pay $13 more dollars for this claim and then the plan will begin to pay coinsurance. After he pays the $13, there is still an outstanding balance of $84. The plan pays 80 percent of this cost, or $67. John is responsible for 20 percent, or $17. Therefore, for this visit, John will pay a total of $30 ($13 deductible + $17 co-insurance).
5. On March 5, Jane sees a specialist and the plan is billed $140, which in turn is reduced to the negotiated rate of $97. So far this year she has paid $125 towards her deductible. Therefore she must pay an additional $75 to meet the annual deductible. After she pays the $75, there is an unpaid balance left of $22. The plan pays $18 (80 percent); Jane is responsible for $4 (20%). For this visit, Jane would spend $79 total. ($75 + $4).
6. On May 5, Tim sees the doctor for his routine preventive care physical. Even though this is Tim's first visit of the year, he does not have to pay his deductible because he is receiving preventive care that is paid by the plan at 100 percent. So the doctor bills $110, which is reduced to the negotiated amount of $90. The plan pays the entire $90 and Tim pays $0.
7. On July 5, John visits his doctor. Since he has already met his calendar year deductible, the entire negotiated amount of $97 is split 80/20 between him and the plan. The plan pays $77 and John must pay $20.
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Articles on this Topic Levels of Managed CareHealth Care Terminology HMO, PPO Plans Explained Prescription Drug Benefits Example: How HMOs Work How PPOs Work: Example 1 How PPOs Work: Example 2 Concepts You Should Know Choosing a Plan More Seminars
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