Definition: The portion of an insurance settlement that is payable by the insured. Insurance policies exist to pay back the money you lose because of an insurable loss. From that money, the insurer subtracts a deductible. Since her home insurance policy covers loss from fire, her insurer will cover the costs. Insurance policies often have more than one deductible.
There is a standard deductible, which applies to most claims. Some policies include other deductibles that apply to specific types of loss. Later in the year, her neighbourhood suffers a flood. When you buy an insurance policy, your insurer will usually let you decide what your deductible is going to be at least for the standard deductible. Learn More. One of the ways for cost-sharing in health system that has been taken into consideration in recent years in some developed countries is paying deductibles.
In case of using deductibles, the insured people more carefully and accurately will use health care services, and potentially many unnecessary costs will be avoided. To investigate the evidence of deductibles in health systems across the world, a literature review was conducted by searching the materials published in databases including ISI web of science, PubMed, Scopus and also Google scholar search engine from to Inclusion criteria were studies carried out only in health insurance, English language, and the year of the study.
The most important positive impacts of deductibles were decrease in utilization of different services, high profitability for the young and healthy people, lower health benefit claims by the insured people, and increase in financial profitability of health insurance organization. Besides, the most negative impacts increase in out of pocket burdens and also higher hospitalization over time. Deductible plans have their own advantages and disadvantages for the insured and insurance organizations in terms of financial dimensions as well as utilization of health services, and explicitly none of these plans can be flawless.
Given the increasing costs of health systems and the potential moral hazard of insured persons, it seems these systems sooner or later should inevitably move towards new cost-sharing plans, including deductibles. Today, due to advancement of technology in various fields of manufacturing and services, the growing costs have become inevitable.
This issue is more eminent in health sector due to the application of diverse diagnostic, therapeutic and rehabilitation methods, as well as using advanced, expensive and complicated equipment for a significant proportion of the population. In facing increasing costs of health care systems around the world, limiting the costs is the common goal of most reforms conducted in health care systems. Meanwhile, one of the major issues that health care systems, and in particular the insurance organizations, have faced over the past decade, is the moral hazard issue.
Moral hazard means changes in health-related behaviors and the amount of health care services consumed due to having health insurance 1. Moral hazard has negative impacts on society and on the health care system. The most important of these impacts are reducing the welfare of people - especially the poor- due to non-optimal allocation of resources, increased premiums and reduced insurance coverage, negative external effects, reduced technical efficiency and allocative efficiency, as well as a reduction in using the benefits of risk pooling 2.
Among the above methods, one of the ways that have been taken into consideration in recent years in some of the world developed countries is paying deductibles.
In this method, the insured person must pay a certain and fixed amount for covered health care services before the insurance organization starts to pay 4. The philosophy of deductibles is that most insured persons can afford low expenses of visits, medications, etc. The reason for using this kind of cost-sharing was that insurers, physicians, and many other people believed that if insurers involve in paying for these costs from the very beginning of health costs, this would increase excessive use of medical services and consequently increases health care costs 5.
In case of using deductibles, since the insured people are obliged to participate fully in paying their costs until they reach the deductibles amounts, more carefully and accurately they will use health care services, and potentially many unnecessary costs will be avoided. Besides, since insurance organizations spend a large part of their expenses on calculation, maintenance, and reimbursement of small amounts claimed by insured persons, this method can reduce many of these additional administrative costs.
On the other hand, in many cases, availability of new medical equipment and procedures is essential for treatment of people, but insurers are not able to provide them due to lack of resources, and therefore there will be a shortage of resources for more severe illnesses; a challenge that many health insurance organizations are currently facing.
Indeed, by not paying for unnecessary services, insurers will be able to redistribute these resources to more cost-effective and necessary services by optimally allocating resources to other priorities of the organization. Therefore, determining appropriate deductibles can be a great success for the patient, the insurer and in general the health care system.
The experience of using deductibles and other forms of cost-sharing date back to the late s in the United States. The four countries of the United States, the Netherlands, Switzerland, and Germany are pioneers in using this method. In the United States, there are two main types of deductibles in health care system. The first type which is the traditional and common model of deductible is provided by health maintenance organizations, preferred provider organizations and point of service plans, both individually and in family 6.
The second type of deductible is high deductible health plans. These plans enjoy more deductible amounts and more discounts in premium 7. Since Jan , a compulsory deductible plan has been applied in the Netherlands. In addition, insured persons can opt for a voluntary deductible plan besides a compulsory deductible plan.
To compensate such an increase in financial risk, the insured persons benefit from premium discounts 8. There are, of course, other options, such as to choose a more amount for deductibles in return for more reduction in the premium for insured persons 9.
In Germany, the deductibles were provided by health social insurance companies since and in the form of optional tariffs Considering the above, this study aimed to determine the advantages and disadvantages of implementing deductible plans based on the experiences of the pioneering countries. To investigate the evidence of deductibles in health systems across the world, a literature review was conducted by searching the materials published in databases including ISI web of science, PubMed, Scopus from to In addition, to ensure that all the studies considered for the study are covered, the Google Scholar search engine was used.
To perform the literature review in the first phase, using the keywords, the search strategy was formulated as described in Table 1 and then it was used to search the above-mentioned databases and the related websites including WHO and the World Bank to extract related studies published in this area. At this stage, to access the most relevant articles in terms of the purpose of the research, using the endnote software for resource management, first using the keywords inserted in the search strategy, the title of the related papers were registered and, in the next step, the titles were refined and the most relevant papers were selected.
Then, as the articles might have been repeatedly selected, duplicate titles were removed after reviewing the titles. Next, the abstracts of the selected papers were studied and those which appeared to be in line with the purpose of the research were inserted into the software. Finally, the full texts of the articles were studied and all the information was extracted using the data collection form. Overall, articles were found after searching the databases using the keywords. What Is an Insurance Deductible?
How an Insurance Deductible Works. Insurance Deductible vs. Out of Pocket. What Is a Minimum Deductible? Policies Without Deductibles. Major Claims and Disasters. How Health Insurance Deductibles Work. By Mila Araujo. Mila Araujo is a certified personal lines insurance broker with more than 20 years of experience in the insurance industry.
She currently serves as the director of personal insurance for Ogilvy Insurance where she works with some of the world's largest insurers and manages the needs of thousands of clients with the help of her broker team. As an insurance expert, has written about homeowners, auto, health, and life insurance for The Balance.
Mila received the Bernard J. Learn about our editorial policies. Reviewed by Janet Berry-Johnson. Article Reviewed October 15, Learn about our Financial Review Board. Tip If you find a zero-deductible plan, always ask how much the policy is without the waiver vs. Key Takeaways An insurance deductible is an amount you pay before your insurer kicks in with their share of an insured loss.
The amount you'll owe will differ from plan to plan. You pay one deductible per claim, but each time you make a claim during a term, you will have to pay it again until you reach your limit.
They do not apply to car liability and home insurance liability claims. Article Sources. Part Of. Your Privacy Rights.
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Note that with auto insurance or a homeowners policy , the deductible applies each time you file a claim. The one major exception to this is in Florida, where hurricane deductibles specifically are applied per season rather than for each storm. Deductibles generally apply to property damage, not to the liability portion of homeowners or auto insurance policies. To use a a homeowners policy example, a deductible would apply to property damaged in a rogue outdoor grill fire , but there would be no deductible against the liability portion of the policy if a burned guest made a medical claim or sued.
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