Deductibles in health insurance policies refer to a predefined amount an insured person typically pays out of pocket while the remaining claim amount is borne by the insurance company. This amount is given as a percentage or proportion of the medical or hospitalisation expenses incurred and is pre-fixed by the insurance provider, which pays for claims only over and above this amount. Paying the deductible reduces the insurance risk, and hence, the premium amount.
How Does Health Insurance Deductible Work?
Let’s understand what is deductible in health insurance with an example.
Suppose a policyholder undergoes medical treatment, leading him to incur a bill of Rs. 50,000. He decides to raise a claim for his expenses. However, he agrees to pay a deductible of Rs. 10,000. In such a scenario, the remaining amount (Rs. 50,000 – Rs. 10,000 = Rs. 40,000) will be paid by the insurance company.
Note that if the expenses are less than the deductible amount, one cannot raise a claim for his/her treatment. For instance, Rohit receives minor treatment from a hospital which costs him Rs. 10,000. As per his insurance policy, the deductible amount is Rs. 15,000. In such a case, he will not be able to raise a claim and pay the entire amount from his pocket.
To avoid bearing a substantial amount as deductible, policyholders should file a claim only in case of higher medical expenses. This will help an applicant benefit from the plan by obtaining the No Claim Bonus. In this way, insurance companies ensure rightful and genuine claims only.
Types of Deductibles in Medical Billing
There are various types of healthcare deductibles offered in both Indian and international markets. They are as follows:
Compulsory deductible
This is a mandatory amount policyholders need to pay every time they raise a claim. For instance, if Rohit’s insurance policy levies a health insurance deductible of Rs. 12,000, and he undergoes a treatment worth Rs. 40,000, he will need to pay this deductible upfront during claim processes.
Voluntary deductible
Members who do not regularly raise claims and look for ways to bring down the insurance premiums can opt for this. In this type, policyholders need to bear a higher deductible, as per their wish, which reduces their premium effectively. Ideally, individuals who are not suffering from a prolonged illness or do not require financial assistance from an insurer can opt for this.
Comprehensive deductible
Currently not available in Indian markets, this type of deductible keeps on adding until a member pays the entire deductible amount agreed upon towards a health insurance plan.
Non-comprehensive deductible
This type of deductible is applicable to selective coverages or medical expenses and not the entire policy. In this case, a member might need to pay for his/her medical expenses before the insurer pays up.
Cumulative deductible
Essentially crafted for a family floater plan, this deductible applies to all family members. After payment of the deductible amount, insurers will settle the claim.
It is crucial to check for the deductible option available under a health insurance policy before opting for it.
Factors Impacting Calculation of a Health Insurance Deductible
Pre-existing health conditions
Before buying a particular insurance plan, one must factor in their pre-existing medical conditions such as diabetes and asthma. Existing conditions can affect the amount of premium in health insurance.
Current health status
Some members might require frequent treatments, and some might not, based on their current health conditions. The deductible amount in insurance largely depends on an applicant’s current health condition. For instance, individuals rarely going for treatments can opt for a higher deductible plan. However, they should not opt for a voluntary deductible if they want to avoid paying a high deductible.
Age
This is also a determining factor in how much deductible one needs to pay during an insurance claim. Since health complications may arise with age, it is vital for a member to consider this factor before choosing a plan.
Past medical concerns
Individuals with a history of any ailment should factor in their present medical condition and consider its future occurrence before choosing a healthcare plan.
Lifestyle and habit
Policyholders with smoking and drinking habits should make an informed decision regarding their healthcare plan by considering their lifestyle.
Applicants need not be confused about deductible meaning in medical billing if they consider the above factors beforehand.
Benefits of Deductibles in Health Insurance
Here are some primary benefits of deductibles in health insurance plans:
- Opting for a higher deductible amount allows policyholders to avail of a higher sum insured under their health insurance policy by paying a low premium amount. For example, if an individual has an insurance policy with his/her employer with a sum insured of Rs. 2 lakh, and wants to increase the coverage amount, he/she can opt for a higher deductible amount. If the policyholder increases the deductible to Rs.2 lakh, he/she can seek a sum insured of Rs. 20 lakh, against a very low premium payment.
- Deductibles and health insurance premiums have an inverse relationship. Since a policyholder pays the deductible amount from out of his/her own pocket, he/she can enjoy the benefit of paying a lower premium. When the deductible amount increases, the premium decreases and vice versa.
- Although one needs to pay deductibles out of the pockets, they can still access health insurance coverage during unforeseen events.
With ample knowledge about the benefits of a health insurance deductible, you can now download the Navi app and purchase the policy within minutes.
Disadvantages of an Annual Aggregate Deductible
Although deductibles in medical insurance reduce the premium amount, it could come with certain disadvantages too, some of which are mentioned as follows:
- In the case of compulsory aggregate deductibles, one needs to pay upfront to receive the claim amount. Therefore, individuals not possessing enough funds will not be able to benefit from their insurance plans.
- During multiple medical emergencies, payment of high deductibles can reduce an applicant’s savings.
However, with proper planning and consideration, one can curtail their deductible amount and avail of medical services without hesitation.
How to Choose a Deductible?
One needs to follow the given points before choosing a deductible:
- Although a higher deductible brings down the premium amount, it may not be safe in the case of health insurance. As this insurance covers medical emergencies, one must consider the right coverage along with deductibles in line with their requirements
- If an individual is comfortable in self-funding a higher deductible during claims, he/she could settle for a high deductible plan.
- Individuals wanting their insurance plan to cover maximum medical expenses must choose one that comes with a higher premium and lower deductible amount.
Final Word
Now that you know the health insurance deductible meaning, making a sound decision regarding insurance will be easier. Furthermore, understanding the working of deductibles and their types can be a good start for first-time insurance buyers.
Additionally, members should consider the aforementioned factors before choosing a health insurance deductible to obtain maximum benefits. Also, knowing the criteria affecting deductible calculation can help them reduce financial pressure that might occur due to a high deductible plan.
Frequently Asked Questions
What happens in case a claim does not meet the required deductible amount?
Insured individuals choose a deductible amount while purchasing a health plan that he/she must pay while raising a claim. In case the insured individual fails to pay this amount, the company would not pay the claim.
How much deductible must one pay in a top-up health insurance plan?
Deductibles in top-up health insurance policies are the amount over which a particular health insurance plan gets triggered. Therefore, a claim amount below the deductible amount must be paid out of own resources or through a regular health insurance policy.
What are the differences between co-payment and deductibles?
Policyholders need to pay a fixed amount (percentage of the total treatment cost) towards their medical expenses, and an insurer pays the rest. This fixed amount is also known as co-pay. It applies to specific medical services.
Alternatively, deductibles are the amount an insured person must bear before claiming benefits from the insurer. It is therefore applicable before the insurer settles claims.
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