MR. WATSON: Now, follow my way of thinking here. What is a corridor?

ALL: Hallway.

MR. WATSON: It's a hallway. Now, if I say "deductible," you know I'm talking about what kind of plan?

MAN: Major medical?

MR. WATSON: Good. So if I have a deductible, what do I have?

ALL: Major medical. If you have a foot, you have a leg.

MR. WATSON: What does a corridor do? It connects. What does a corridor connect? Two things. If I describe the deductible as being a corridor deductible , we know the deductible is already connected to the what?

STUDENTS: Major medical.

MR. WATSON: Very good. Major medical. And it's got to be connected to something else. What is the only other thing we have talked about? The basic plan. So if I say "corridor deductible," you know you've got two plans, the major medical and the basic. There are only two types of medical expense plans, Basic Medical expense and Major Medical. You understand?

STUDENTS: Yes.

MR. WATSON: So the major medical is supplementing the basic plan. The basic plan ALWAYS pays first. Once those benefits are exhausted, what do you do? Pay the deductible; the corridor deductible and the umbrella of the major medical plan opens up. Make sense?

STUDENTS: Yes.

MR. WATSON: So you can tell by the words I use what kind of plan I have. In other words, here we have a basic plan. How much do you want it to pay? Make up a number.

MAN: $30,000.

MR. WATSON: All right. Write this down. I am talking to you, the person reading this. We are going to have a basic plan that pays $30,000. Supplementing this will be a major medical with a corridor deductible. What do you want the deductible to be? Let's say $100, and then co-insurance of 80/20. And we'll say again that our hospital expenses were $100,100.

WOMAN: But the basic plan has no deductible and no co-pay, I suppose?

MR. WATSON: Exactly. This is a basic plan with a major medical supplementing it. What's the first thing that happens? What pays first?

ALL: The Basic Plan.

MR. WATSON: So that pays how much?

ALL: $30,000.

MR. WATSON: $30,000, and you don't pay a deductible because it's the basic part of the plan. How much is left to pay?

STUDENTS: $70,100.

MR. WATSON: So the basic benefits have been exhausted with the $30,000. Do you agree?

ALL: Yes.

MR. WATSON: What do you do now?

ALL: Pay the $100 deductible.

MR. WATSON: Which leaves what? $70,000. Then the major medical policy will pay what?

ALL: 80 percent.

MR. WATSON: Right, 80% of $70,000, which is $56,000, and you pay the balance which is the remaining 20%, or $14,000. What's your out-of-pocket expense? The $14,000 plus the $100 deductible, $14,100. In the other case, with the stand-alone plan, the insured's total cost was $20,000 plus the deductible. Do you agree? When I say "corridor" you know I have two plans. So when I say "corridor deductible," you know I'm talking about a supplementary major medical which is supplementing the basic plan. Good.