The Ultimate Guide to Understanding Health Insurance Deductibles

One of the major reasons for taking health insurance is to reduce the financial burden of medical expenses. Insurance can cover more than just medical bills. It can cover several small expenses and even provide peace of mind. To avail of its full protection, you must understand the terms and concepts of health insurance. One such term is "deductible"'. It is a key concept in health insurance and must be understood correctly. This blog aims to explain health insurance deductibles, outlining their operating principles and the importance of deductibles to lower premiums.

What are Deductibles in Health Insurance?

A deductible is a fixed amount you, as a policyholder, must pay as an out-of-pocket cost for medical services before your health insurance begins to cover costs. Think of it as your share of healthcare expenses, with your insurance company stepping in once you reach a certain threshold. Deductibles are typically set on an annual basis, meaning they reset every year. For example, if your deductible is INR 25,000 and you incur medical expenses of INR 75,000, you would pay the first INR 25,000, and your insurance company would cover the remaining INR 50,000.

Types of Deductibles in India

In India, health insurance deductibles come in three main types:

Compulsory Deductibles

This is a fixed amount determined by the insurance company that you must pay at the time of an event or claim. It's non-negotiable and is designed to ensure that policyholders share the costs with insurers. The balance beyond this deductible is covered by your health insurance.

Voluntary Deductibles

Voluntary deductibles are for policyholders who want to pay less for their health insurance premiums by agreeing to a higher deductible. This option is suitable for those who don't need frequent medical services or claims. The higher the voluntary deductible, the lower the premium cost. If you choose this option, you agree to a larger out-of-pocket payment when filing a claim.

Cumulative Deductibles

Cumulative deductibles apply to family floater health insurance plans. In this type, a family is insured under one policy with a shared deductible. The total deductible is cumulative, meaning it's spread among all family members. This option is often more cost-effective for families, as it allows them to cover multiple individuals under a single plan.

Deductible vs. Copay

A deductible is a fixed amount the insured person needs to pay each year for the eligible medical services covered in the health insurance plan before the insurance company begins to share the covered services’ cost. The services can be bills for hospitalization, lab tests, surgery, CAT and MRI scans, medical devices, etc. Deductibles for individual coverage and family coverage are different. Copay is a sum amount that one needs to pay every time they fill a prescription or visit a doctor. Copay covers the portion of the medication or the cost of visiting a doctor. The insured person will be given a health card. For example, if you have a fever and you visit a doctor. The amount you pay at the doctor’s clinic is your Copay. The policyholder will be responsible for any charges that are not covered in the health insurance policy plan.

Factors Determining Deductibles in Health Insurance Premiums

Several factors determine the deductible amount in a health insurance policy:

Age

People of old age can become subject to higher deductibles because, statistically, they have more reasons to seek medical treatment.

Health Status

People who already have pre-existing medical conditions or a history of prior medical issues might get higher deductibles as they are considered people with higher risk.

Coverage Level

Larger coverage policies usually have lower deductibles when compared to limited coverage policies.

Premium Cost

Policies with lower premiums may have higher deductibles, and vice versa.

Policy Type

A type of policy can differ between high-deductible and traditional.

Advantages of Health Insurance Deductibles

Health insurance deductibles offer several advantages:

Lower Premiums

Higher deductibles generally lead to lower premiums. This can make health insurance more affordable for those who don't frequently need medical care.

Cost-Sharing

Deductibles encourage policyholders to share the costs with their insurance companies, reducing the burden on insurers and helping to keep premiums lower.

Reduced Fraud

By requiring policyholders to pay a portion of their medical expenses, deductibles can help reduce fraudulent claims and encourage responsible use of health insurance.

Conclusion

Deductibles are an important part of health insurance. Understanding their role will let you make the right choices about your healthcare coverage. By choosing health insurance deductibles related to their financial abilities, policyholders can be prepared for medical emergencies.

Frequently Asked Questions

1. Why is a deductible mandatory in health insurance?

Deductibles are mandatory to protect insurance companies from fraudulent claims and to encourage policyholders to use health insurance wisely.

2. Does a deductible reduce the sum insured?

No, a deductible does not reduce the sum insured. It only determines how much you need to pay before your insurance coverage starts.

3. Are deductibles and copays the same thing?

No, they are different. A deductible is a fixed amount you pay before your insurance covers medical services, while a copay is a fee you pay each time you use a specific service.

4. What is the amount of the deductible in the health insurance policies?

The amount of the deductible may differ from one health insurance company to another. A deductible is calculated based on the sum insured the policyholder has opted for. Read up on what is sum insured in health insurance.   *Standard T&C apply Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.