Deductibles
What are Deductibles?
Deductibles in health insurance refer to the amount that a policyholder must pay out-of-pocket before the insurance company starts to pay its share of the covered costs. This is a predetermined amount specified in the health insurance policy.
How Do Deductibles Work in Health Insurance?
Deductibles indicate the amount that policyholders are responsible for each policy year. Once this amount is paid, the insurance coverage kicks in to cover subsequent medical costs according to the policy terms.
Example: Suppose your health insurance policy includes a deductible of AED 1,000. If you incur medical expenses totaling AED 4,000, you must pay the first AED 1,000.
After your payment, the insurance company will cover the remaining AED 3,000 or a portion of it, depending on your policy's coverage details.
Role of Health Insurance Deductible
- Cost Management: Helps in keeping the insurance premiums lower, as it reduces the number of small claims
- Encourages Responsibility: Encourages policyholders to be more conscious about their healthcare spending
- Risk Sharing: Shares the cost burden between the insurer and the insured and aligns the interests of both parties
Difference Between Deductible, Coinsurance, and Copay
- Deductible: The fixed amount you pay before your insurance starts to cover its portion of the costs
- Coinsurance: A percentage of the total medical bill that the policyholder is responsible for paying after the deductible is met. This continues until reaching the out-of-pocket maximum
- Copay: A fixed amount paid by the policyholder for specific services, like a doctor’s visit or prescription drugs, regardless of the deductible
Example
Suppose you have a medical bill of AED 5,000, a deductible of AED 1,000, a copay of AED 100 per doctor visit, and coinsurance of 20%.
- You pay the first AED 1,000 (deductible)
- For the remaining AED 4,000, your coinsurance of 20% amounts to AED 800 that you owe
- If this treatment requires two doctor’s visits, you also pay AED 200 as copay (AED 100 per visit)
Your total out-of-pocket expense would be AED 2,000 (AED 1,000 deductible + AED 800 coinsurance + AED 200 copay). The insurance plan would cover the rest.
