What is the typical effect of a deductible in a health insurance policy?

• A. It eliminates the insurer's obligation to pay anything
• B. It reduces the amount the insurer pays toward covered expenses
• C. It increases the policy's premium without changing benefits
• D. It only applies to cosmetic procedures.

Answer: (B)

A deductible is the amount you must pay out of pocket before the insurer starts paying for covered services. This means the deductible reduces the insurer’s payment toward the initial, eligible expenses you incur; once you’ve paid that amount, the plan shares costs according to its coinsurance until you reach the out-of-pocket maximum. For example, with a $1,000 deductible and 80% coinsurance, you cover the first $1,000, then the insurer pays 80% of the remaining covered costs while you pay 20% until you hit the out-of-pocket limit. The deductible doesn’t wipe out the insurer’s obligation entirely, isn’t limited to cosmetic procedures, and while plan design can affect premiums, the defining effect of a deductible is shifting the initial cost burden to you.