What is Deductible in Health Insurance?

Health Insurance Deductibles Explained 

Health insurance plans are a lifesaver during emergency medical situations. However, while going through the medical policy terms, certain terminologies may seem confusing. One such factor is the 'deductible' in a health insurance plan.

What is deductible in health insurance? 

A deductible refers to a fixed amount of money you pay out of pocket for covered health expenses before your health insurance company begins covering the costs. It's the share of the healthcare costs before your health insurance coverage begins. You will pay the deductible amount for covered healthcare expenses like doctor visits, hospital stays, or surgeries before your insurance starts paying.  

Types of Deductibles in Health Insurance

Under health insurance plans in India, we have two types of deductibles:

1. Compulsory Deductible - A mandatory deductible amount fixed by the insurance company.
2. Voluntary Deductible - The amount that policyholders choose to pay on their own at the time of claim settlement.

What is Deductible in Top-Up Health Insurance?

In top-up health insurance, a deductible is the predefined amount that you must pay out-of-the-pocket before the top-up coverage starts. The top-up policy only covers expenses above the deductible amount.

What is deductible in health insurance with example?

A health insurance deductible is the dollar amount you must pay for health care expenses before your insurance policy begins to pay for services. It's really your portion of the medical bill. Let's say your deductible is ₹10,000 and your medical bill comes to ₹15,000. You'll pay the first ₹10,000, and your insurance will cover the balance of ₹5,000.

Benefits of Health Insurance Deductibles

1. For Policyholders

The presence of deductibles in health insurance ensures it is convenient for people with pre-existing conditions to get a health insurance plan. This is because when a policyholder with PED signs up for deductibles, they present a mitigated complication for health insurers, who then become more willing to provide health insurance policies. 
Premiums are mitigated with a deductible for the health insurance plan one gets. Since the complications of policyholders are lowered by a threshold, health insurers are ready to provide affordable health insurance policies with comparatively lower premiums. 

2. For Health Insurers  

Health insurance policies are supposed to give policyholders financial security options. However, having easy accessibility to similar funds made the insurance companies vulnerable to claims being raised for low-value treatments. With a deductible in place, such small-value claims could be easily avoided. 
 

Understanding Deductibles in Health Insurance

An insurance deductible is the value of money a policyholder must settle from themselves before their insurance policy begins covering the promised expenses. The deductible amount varies according to the nature of the medical insurance plan purchased. It can range from several thousand to even a few lakh rupees.

Health insurance companies have introduced deductibles in their policies for many reasons. The primary ones include:

• Deductibles help reduce the frequency of small claims.
• This parameter encourages all the policyholders to exhibit responsible use of their health insurance policy.
• Finally, by introducing deductibles, insurance companies successfully share their financial risks with the policyseekers

Overall, the addition of deductibles proves advantageous to both insurers and policyholders in several ways. You can probably better understand this viewpoint after reviewing the following example.

Let's assume you purchase a medical insurance plan with a Rs. 20,000 deductible. During the policy term, you are suddenly diagnosed with dengue and visit a nearby network hospital for treatment. There, the total bill comes to Rs. 80,000. In this scenario, you will need to pay Rs. 20,000 of the total bill out of pocket. Next, your insurer settles the remaining amount according to the terms and conditions of your healthcare plan.

However, you may wonder what happens if your total medical expenses do not cross the agreed-upon deductible of Rs. 20,000. In such instances, your health insurance company will not provide financial assistance, and you will be solely liable to pay the whole amount. 

What Decides the Deductible Amount?

Several factors come together to influence the deductible amount in a health insurance plan. It includes:

•  Age : Typically, older policyholders may be given slightly more deductibles because they are more prone to avail of medical assistance.
• Premium Cost : If your premium is low, then the deductible amount will rise and vice versa.
• Health Status : If you are diagnosed with any such pre-existing diseases, then you can be subject to greater deductibles. This is because your insurance provider considers similar policyholders to be high-risk individuals.
• Policy Type: The type of policy you prefer obtaining also affects the deductible amount. For instance, if you choose a high-deductible health plan (HDHP) from Star Health, you will have a higher deductible and, consequently, a lower premium on your medical insurance.

Types of Health Insurance Deductibles

1. Compulsory Deductible: This is an obligatory deductible sum by the insurance provider. You have to pay this first before your insurance cover kicks in for a claim. It is a pre-stated sum or percentage of the claim value, declared ahead of time under your policy.
2. Voluntary Deductible: This is a voluntary deductible sum that the policy owner may pay. Taking a high voluntary deductible can reduce your premium payments. This deductible is usually opted for by those who rarely make claims or wish to lower their premium payments.
3. Comprehensive Deductible: This is a deductible that covers all the covered medical costs under the health policy of insurance. A single deductible is applied to all the expenses covered under the policy.
4. Non-Comprehensive Deductible: This deductible is limited to only certain kinds of medical costs or certain insurance coverages under the policy, not the entire policy. For instance, it may be only for prescription drug expenses or selected hospitalizations.
5. Cumulative Deductible: This deductible is generally seen in family floater plans. The amount of deductible accumulates for all the family members who are covered under the policy. After the sum of deductible amount is reached, the insurance coverage starts for all members of the family.
6. Family Deductible: This deductible covers all the family members who are covered under a family medical insurance plan. Once the family deductible is satisfied, the family members' coverage commences. Family plans also come with embedded deductibles, where every individual family member has his or her own deductible, and the family deductible as well.
7. Individual Deductible: This is a simple deductible that applies to the healthcare expenses of an individual alone. The individual has to pay this amount out-of-pocket before the insurance provider begins covering expenses. It is important to comprehend the various forms of deductibles in order to select an appropriate health insurance policy and effectively control your healthcare expenses.

Finally, opting for a medical insurance plan with a deductible increases your financial responsibility for out-of-pocket medical expenses. It encourages careful budgeting to prepare for unexpected medical emergencies before your insurer eventually begins coverage.