Which statement about the relationship between deductibles, coinsurance and premiums is most accurate?

• A. Higher deductibles always raise premiums.
• B. Deductibles do not affect premiums.
• C. Higher deductibles and coinsurance generally lower premiums.
• D. Premiums are independent of deductibles and coinsurance.

Answer: (C)

In medical expense insurance, the price you pay for coverage (the premium) reflects how much risk the insurer has to take on. When you raise your deductible, you’re agreeing to cover more of the costs before the policy pays, so the insurer expects to pay less overall. To balance that lower risk, the insurer can charge a lower premium. The same idea applies to coinsurance: if you take on a larger share of costs after the deductible is met (higher coinsurance), the insurer expects to pay less, which justifies a lower premium. So, higher deductibles and higher coinsurance generally lead to lower premiums. The other statements either say there’s no effect or that premiums rise with higher cost-sharing, which isn’t how the typical design of these plans works.