Lower Your Health Insurance Cost with Deductibles and Coinsurance
8 December 2021
If you wonder how to lower your health insurance premium, read on. Our Alea experts cut through the insurance jargon and explain everything about deductible, coinsurance and how they affect premiums. Protecting your health should not be a burden and we believe there are solutions for every situation.
What is a health insurance deductible and how does it work?
A deductible is a pre-established amount of money you agree to pay during your policy year. The deductible is fixed in advance. It means that you will pay first and your insurer will then pay for your healthcare expenses once you have reached that amount. It usually ranges between US$0 and US$10,000 and applies per person and policy year. In rare instances, the deductible is per family and not per family member.
In most cases, a deductible applies to the inpatient and surgical part only of your medical coverage, which we at Alea think is best. High ticket items are usually billed under inpatient benefits and a fixed amount that you have to pay out-of-pocket gives you better price predictability and transparency than a % (coinsurance).
Alea tends to favor deductible options applied to inpatient benefits only as it won't impact your outpatient coverage. Because routine medical care (GP, specialist consultations) are smaller bills and inpatient care is rarer, you might end up paying most of your medical bills before reaching the deductible limit.
What is health insurance coinsurance?
Coinsurance is another cost-sharing mechanism between you and the insurer. Unlike deductibles, coinsurance applies to each medical bill. It is a pre-established percentage, so the amount will vary from one claim to another. To sum up, you will have to pay a certain percentage of the bill every time. In Hong Kong and as with international medical plans, co-insurance generally varies between 10 to 30%.
Coinsurance options are more common under outpatient benefits. With coinsurance, you pay a lower premium while paying just a small part of your medical outpatient expenses.
We at Alea believe that coinsurance is usually more attractive under outpatient benefits as opposed to inpatient benefits. In Hong Kong where private healthcare is the second most expensive in the world, inpatient coinsurance can entail substantial, unpredictable amounts — not really in your favor.
How do deductibles and coinsurance apply to your insurance policy?
Here are a few examples to better understand how deductible and coinsurance mechanisms work. Please note that some insurance products allow you to choose both a deductible and coinsurance option simultaneously.
Example 1: Inpatient deductible
HK$40,000 deductible on inpatient benefits only.
Your child needs ear surgery and has grommets inserted for HK$100,000 (approx. cost in HK private sector).
You pay HK$40,000 and your insurance provider pays HK$60,000. Should your child need inpatient care again during the year, you will not have to pay any deductible this time as you have exhausted the amount.
Example 2: Outpatient coinsurance
Coinsurance: 20% on outpatient benefits only.
You see a dermatologist and the consultation fee is HK$1,000. You will have to pay 20% of the amount: HK$200.
Should you wish to see the same dermatologist again or another doctor with a different specialty, you will always have to pay 20% of the medical bill.
Example 3: Inpatient deductible + Outpatient coinsurance
Deductible = HK$40,000 for inpatient + Coinsurance: 20% for outpatient
In the same policy year, you break your arm for which you need surgery that costs HK$120,000 and you see a rheumatologist 5 times for the management of your chronic condition, lupus. Each consultation costs HK$1,200.
For your arm surgery, you pay HK$40,000 from your own pocket and your insurance provider pays the remaining HK$80,000. As for your 5 rheumatologist consultations, you have to pay 20% of each bill which amounts to HK$240 per visit. You are reimbursed HK$4,800 for these 5 visits.
In total, you had to pay HK$41,200 (40,000+1,200) out-of-pocket and you were reimbursed HK$84,800 (80,000+4,800).
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What are the advantages of adding a deductible and coinsurance to your health insurance plan?
The main advantage of adding a deductible and/or coinsurance to your plan is to lower your premiums.
Here are a few examples of the impact of deductible and coinsurance on the annual premium for international plans with worldwide cover excluding the USA.
|Profile||Single man, 28 years old||Couple, 35 years old, with 2 kids aged 3 and 7||Couple, 50 years old|
|Type of plan||Outpatient and inpatient (private room)||Outpatient and inpatient (private room)||Inpatient only (private room)|
|Deductible (US$)||1,500 (on inpatient)||1,500 (on inpatient)||1,500 (on inpatient)|
|Coinsurance||20% (on outpatient)||20% (on outpatient)||/|
|Annual Premium (US$)||From 2,900 to 5,200||From 10,700 to 20,000||From 5,000 to 10,000|
|Annual premium (US$ without deductible or coinsurance)||From 4,000 to 6,000||From 14,500 to 22,800||From 6,200 to 11,000|
What are the disadvantages of adding deductibles and coinsurance?
Deductibles or coinsurance may deter you from getting medical care since you will have to pay for part of it and postponing treatments may not be in your best interest.
It may be difficult to change your deductible and coinsurance options in the future as some insurers consider these changes as plan upgrades that entail new underwriting. It means you may have to complete a new medical questionnaire and expose yourself to new terms and conditions such as pre-existing condition exclusion or surcharge.
Can I have a deductible or coinsurance under my work coverage?
It is less likely to have a deductible or coinsurance under your employee medical benefits. That being said, some employers in Hong Kong provide outpatient benefits with coinsurance or co-pay. Co-pay is most often seen in local medical plans that have several sub-limits of reimbursement per category of care. It is important to check whether the co-pay requirement applies to all medical providers or only the ones that are not part of the insurer’s direct billing network.
When choosing personal medical coverage, you have the freedom to choose whether or not you want a deductible or coinsurance. Unlike employee medical benefits, you can purchase what corresponds best to your specific needs and budget.
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This article was independently written by Alea and is not sponsored. It is informative only and not intended to be a substitute for professional advice and should never be relied upon for specific advice.