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Doctors Risk

Health Insurance Deductibles Simplified

If few things we can learn from Covid – 19 pandemic is to keep Physical, Mental and Financial Health in check, that we are ready to face any surprise challenges. One such easy way of mitigating challenges is to be insured but even insurance such as health, auto, homeowner’s comes with caveats. This caveat in the insurance world is known as Deductible.

What is Insurance Deductible?

The out of pocket expenses that the insured or claimant must pay for the healthcare services covered under insurance plan,before your plan begins to pay benefits for eligible expenses. The amount of the health insurance deductible is determined by the type of health insurance plan and its coverage benefits that you have.

The higher the policy’s deductible, the lower the annual or monthly premium payments. The higher policy deductible results in a lower monthly payment. monthly premium is the fees paid on a recurring basis to the health insurance company to provide you with coverage.

How Health Insurance Deductibles Work?

 

It is commonly understood that the insured has to pay only the premium for the coverage. There is deducibles which claimants must pay before the insurance plan will start to cover the eligible healthcare expenses.

For example, If your health insurance plan has a deductible of INR 30,000,  you will have to pay all of your eligible medical expenses until you have met that INR 30,000 deductible. At that point, your insurance will start paying for the services you use (although the amount it pays may not entirely cover the cost of care).

In individual health coverage, you may pay one deductible for eligible healthcare expenses and another toward prescription drugs. If you have family coverage, you may pay individual deductibles for each person who’s covered, as well as a family deductible for the policy. Sometimes an insurance plan will pay for certain covered services, such as preventive care, without requiring you to pay anything toward them to meet your deductible.

Why Insurance Policies Have Deductibles

 

Through deductibles insurance companies share costs with policyholders when the claims are made. The other reasons for deductibles are: moral hazards and financial stability.

 

Moral Hazards

 

The behavioral risk of moral hazards is alleviated from deductibles. The risk that a policyholder will not be able to act in good faith is a moral danger. Insurance policies protect the policyholders against losses, so an inherent moral risk exists: the insured party can conduct itself riskily, without any financial consequences.

 

For example, if drivers are insured for a car, they might have the incentive to drive rashly or leave your vehicle in a dangerous area without supervision because they are insured against theft and damage. They have no “skin in the game” without any deductible.

Financial Stability

 

Insurance policies also use deductibles to provide the insurer with a measure of financial stability. A properly structured policy protects against disastrous losses. A deductible provides a cushion between any given minimal loss and a truly catastrophic loss.

Suppose, for instance, that an insurance policy has no deduction. The insurer would be responsible for the cost of every minor claim irrespective of the amount. This would create a huge number of claims and increase the policy’s financial costs. The insurer could also have a difficult time reacting properly to the actual losses caused in the event of catastrophic events.

 

Copayments and Coinsurance

 

It’s also important to understand what the deductible  does and  not cover for assessing health insurance coverage. “There will be a deductible for the year on any approved medical expenses you pay out of pocket. Co-payments are generally taken into account as exceptions. Your co-payment is a fixed dollar amount you pay for visits to the doctor, for medicines or for visits to an emergency care centre. These amounts may not be calculated for your yearly deductibles.

The amount you pay for medical services after you have met the deductible and your plan begins to pay should not be confused with co-insurance. The amount you are paying for your deductibles, co-payments and insurance is the maximum amount you are paying for your annual insurance plan before the beginning of payment is 100 percent.

 

Illustration:

 

Suppose you have a INR 20,000 deductible, a INR 5000 copay, 80/20 coinsurance, and an out-of-pocket maximum of INR 30,000.

You are visiting an orthopedist for hip pain (INR 5000 copay). The doctor directs an MRI to determine what causes the pain. The cost of the MRI is INR 20,000. You are paying the full price and you are paying your deductible.

The MRI shows that you have a ripped labrum and that you need surgery to remedy this. Operation costs INR 2,00,000 all in all. Your 20% co-insurance will cost INR 40,000. However, you only owe INR 10,000 because you have a maximum of INR 30,000 out of your pocket. The rest is paid by your insurance, provided that all fees are paid for.

 

Health Insurance Deductibles and Marketplace Plans

 

In India health insurance is offered  through various plans by different companies. The different plans have different deductible limits, which varies as per the risk covered. At the entry  level, you would typically have the lowest monthly premium, but you’d likely pay the most for deductibles . At the other end of the spectrum, a top end plan would offer the most coverage for healthcare plus the lowest deductible. If you have more money for things like routine care, specialists or prescription medicines, this could be good. The compromise is that premium plans are the most expensive. Find out if you are entitled to discounts for cost-sharing through various websites available in the market.

You can negotiate a lower care rate if you decide to pay yourself rather than your insurance coverage when you think you will not be able to pay the year-round deductible. If you’d rather pay from the pocket, doctors , hospitals and other health providers might be prepared to offer services at a reduced rate. If you end up with a health crisis, it’s only a very big risk to take.

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