DEDUCTIBLES AND COINSURANCE Meaning and
Definition
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Deductibles and coinsurance are terms commonly used in insurance policies and healthcare systems to describe the financial responsibilities of policyholders and patients, respectively, for covered services and treatments.
A deductible can be defined as the predetermined amount of money that an individual must pay out of their own pocket before their insurance coverage takes effect. This initial cost is usually an annual figure, meaning it must be met each year before insurance benefits begin to cover expenses. For instance, if an insurance policy has a $500 deductible, the policyholder must personally pay for the first $500 of healthcare costs in a given year before their insurance starts contributing towards subsequent expenses.
Coinsurance, on the other hand, refers to the percentage of the total cost of a medical service or treatment that the patient is responsible for, even after the deductible has been met. It is the cost-sharing between the insurer and the insured, where the insurer pays a certain percentage, and the insured pays the remaining percentage. For example, if a healthcare plan has a 20% coinsurance, the insured party is accountable for paying 20% of the total cost, while the insurance covers the remaining 80%.
Deductibles and coinsurance are implemented to ensure that policyholders and patients have a financial stake in their healthcare expenses. It is important for individuals to be aware of these terms and the specific amounts and percentages outlined in their insurance policies in order to effectively plan and budget for their healthcare needs.
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