What is the purpose of a deductible in health insurance?

• A. To reduce premium costs
• B. To increase the insurer's profits
• C. To guarantee full coverage
• D. To speed up claim processing

Answer: (A)

A deductible is a cost-sharing mechanism that requires you to pay a set amount out of pocket before your health plan starts paying benefits. Because you’re taking on part of the initial cost, the insurer’s risk is reduced, which allows for lower premium costs for the insured. So, the purpose is to reduce premium costs by shifting some of the initial expenses to the insured. After meeting the deductible, the plan typically pays according to its coinsurance or copay rules. The deductible isn’t about guaranteeing full coverage or speeding up claims.