When two parties pay part of the expenses, it’s called cost sharing. Deductibles, coinsurance, and copays are all examples of cost sharing. Understanding how these work help you know when and how much you have to pay.
A deductible is the amount you pay for services before your insurance begins to pay. Let's say your plan's deductible is $1,000.00. That means for most services, you'll pay 100 percent of your expenses until the amount you pay reaches $1,000.00. After that, you share the cost with your plan by paying any coinsurance or copays.
Coinsurance is your share of the costs of a service. It's usually figured as a percentage of the amount allowed to be charged for services. You start paying coinsurance after you've paid any required deductible.
A copay is a fixed amount you pay for a service, usually when you receive the service. In some plans the copay amount can vary by the type of service. Most plans have a specified copay amount by type of service. For example, most individuals are familiar with medical plans where a doctor’s office visit might have a copay of $25. The copay for an emergency room visit will usually cost more, such as $250.
The Petroleum Tank Release Cleanup Fund does not have a deductible or a coinsurance requirement. It does, however, have a copay requirement. The copay requirement varies by the type of petroleum storage tank that the release occurred from.
For a release from a heating oil tank when product is for consumptive use on the premises where it is stored or from a farm or residential tank with a capacity of 1,100 gallons or less that is used for storing motor fuel for noncommercial purposes, the copay is 50 percent of the first $10,000 of eligible costs (50% of $10,00.00 = $5,000.00). Once the copay is met, the Fund reimburses 100 percent of subsequent eligible costs up to a maximum total reimbursement of $495,000.
For a release from any other type of Fund-eligible tank, the copay is 50 percent of the first $35,000 of eligible costs (50% of $35,000.00 = $17,500.00). Once the copay is met the fund reimburses 100 percent of subsequent eligible costs, up to a maximum total reimbursement of $982,500.
Since the copay is 50 percent of eligible costs, the owner is responsible for half of every corrective action expense that is determined to be Fund-eligible and determined to be actually, reasonably, and necessarily incurred to clean up the release. The owner remains responsible for 100 percent of any costs that are not considered eligible or actually, reasonably, or necessarily incurred to clean up the release.
There are several qualification requirements for a tank to be eligible for the Fund. Releases must be discovered and reported to the Department of Environmental Quality (DEQ or department) on or after April 13, 1989, must be in compliance with certain petroleum storage tank requirements, and must remain in compliance with certain storage tank requirements.
In order for costs to be reimbursable from the Fund the costs must be associated with cleanup, must be part of a department-approved corrective action plan, must be Fund-eligible, and must be actually, reasonably, or necessarily incurred to clean up the release. As an example, costs associated with upgrading a petroleum storage tank system or any part of a petroleum storage tank system are not considered Fund-eligible costs.
Multiple Funding Sources
Costs paid (or reimbursed to an owner/operator) by an insurer (or grantor) can be considered to have been paid by the owner or operator toward satisfaction of the 50% copay requirements only if:
- The owner has insurance (or grant) that covers clenup costs, and
- The costs the insurer (or grantor) pays or reimburses an owner or operator qualify as fund-eligible and reimbursable costs, and
- The owner or operator notifies the Board of that reimbursement by filing an Allocation to Copay (Form 11) before applying for reimbursement from the Fund by filing a Claim for Reimbursement (Form 3).
Therefore, the owner needs to decide if they want to have insurance (or grant) dollars go towards their copay. If they do, they need to inform the Board of those costs the insurance company has reimbursed the owner by completing a Request for Allocation of Costs to Co-Pay form (Form 11) and provide it to the Board before applying for reimbursement from the Fund (Form 3).
When an owner has insurance (or grant) funding that is being used to investigate and mitigate a petroleum spill, it can be quite difficult to keep all the financial aspects organized. It is possible to have multiple contractors conducting different aspects of the investigation, remediation, and reconstruction that are invoicing at different times. When these expenses are being covered by multiple sources of funding the financial aspects of the project become quite complicated. In addition, completing and submitting the proper forms, whether requesting allocation of costs to copay, requesting reimbursement from the Fund, or obtaining reimbursement from insurance (or grant) needs to be done accurately and in the proper manner.
The manner in which costs are submitted to the Board is very important and should be coordinated with the other available funding sources. In most instances, a grant or insurance payment received from another funding source can be used to offset the owners co-pay requirement. A Multiple Source Funding Spreadsheet (Form 10) was created to assist owners, or their representative, to harmonize the funding source with the invoice information. The Board recommends that the owner update the Form 10 (or equivalent) for all costs incurred and submit an updated Form 10 each time a Request for Allocation of Costs to Co-Pay (form 11) or a Claim for Reimbursement (Form 3) is submitted.