I`m going to partly write by myself and partly add someone`s article. I never copy other people`s writing, but this time, I decided to do so. I also provide a link to the original source on an eHow website. I found their explanation very good. Let me start from my own first.
In my opinion high deductibles/excess will work for those who almost never get sick. The reason is that they will benefit from lower premiums, have the piece of mind in case anything happens and they won`t need to pay from own pocket first high cost. However those who get sick more often it will cost more at the end. The deductible amount is not refundable, nobody gives you back what you`ve initially spent. It can be even as high as $1000 or $5000 per insured person. The insurance companies will pay reimbursement after you reach $1000 deductible. Let me give you the just example: Let`s say your insurance policy cost $2000 a year, but with $1000 deductible you will pay $1500. You saved $500 on your yearly premium (Yeah!). Unfortunately, it happens that you get sick more often than you expected. Well, you must reach $1000 deductible before you can claim to the insurance company the cost of your treatment. It means your discount is not really discount. You pay at the end from your own pocket. The article below from eHow explains this clearer.
Purpose of Health Insurance Deductibles
Health insurance deductibles are a way to help offset the cost of health care. Health insurance deductibles require the insured (the person who is covered under a health insurance policy) to pay a certain amount toward his health coverage before the insurance company has to begin paying under the health insurance policy. The insurance company considers the amount of the health insurance deductible when determining how much the premiums for the health insurance coverage will be. The higher the deductible is, the lower the premiums are likely to be.
How Health Insurance Deductibles are Used
If a health insurance policy includes deductibles, then the insured must pay a certain amount of money toward his health care before the insurance company has to pay anything under the health insurance policy. For example, if an insured has a $1,000 deductible toward his hospital/surgical coverage, then he is responsible for paying the hospital for the first $1,000 of health costs incurred. After he pays the first $1,000, then the insurance company will begin paying toward health care costs after the initial $1,000 as laid out under the terms of the policy.
Difference Between Health Insurance Deductibles and Co-pays
Health insurance deductibles are not the same thing as co-pays. If a health insurance policy has a $50 co-pay and a $500 deductible, then the insured is responsible for paying for the first $500 of health care costs under his policy. After he has met the $500 deductible, then he is responsible for paying a $50 co-pay for each claim filed under his health insurance policy. The insurance company will pay the remainder of the charges due for each visit as long as the place providing medical care is covered under the health insurance policy.
Health Insurance Deductibles for Various Types of Coverage
Most health insurance policies have different deductibles for different types of health insurance coverage. For example, a person might have to meet a $1,000 deductible before his insurance company will pay for a hospital visit. However, he might only need to meet a $250 deductible before an insurance company will pay for prescription medication.
Raising Deductibles to Lower Costs
Health insurance policies with larger deductibles generally have lower premiums. This is because the insurance company is less likely to have to pay out as much money under a health insurance policy because the insured is responsible for shouldering a larger amount of his health care costs. If you want to lower the amount of money you pay for health insurance coverage, consider asking for higher health insurance deductibles.
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