A recent viral discussion on the X app (formerly Twitter) highlighted a common concern among policyholders: the necessity of upfront payments at private hospitals despite having medical insurance. This is due to the structures known as deductible and co-insurance, which are critical components of many health insurance policies. This article aims to clarify these terms to help you navigate your insurance plan better.
What is a Deductible in Health Insurance?
A deductible is a set amount you must pay out-of-pocket before your insurer begins to cover your medical expenses. This amount is predetermined and is typically required per hospital admission or on an annual basis.
Example of How Deductibles Work:
Suppose you’re hospitalized with a bill of RM20,000.
If your insurance policy has a deductible of RM5,000, you will pay this amount first, and your insurance company will cover the remaining RM15,000.
If your deductible is annual, further admissions within the year won’t require another deductible payment.
However, if it’s charged per admission, you’ll pay RM5,000 each time you’re hospitalized.
Deductibles help prevent the misuse of medical insurance, particularly for minor ailments that could be treated at a lower cost elsewhere, thereby encouraging more responsible use of insurance resources.
What is Co-Insurance in Health Insurance?
Co-insurance is a shared cost mechanism where you and your insurer split the cost of your medical expenses after your deductible is paid, usually in a predetermined percentage like 80:20.
Example of How Co-Insurance Works:
For a hospital bill of RM20,000, after paying a RM5,000 deductible, the remaining RM15,000 is split with 20% (RM3,000) paid by you and 80% (RM12,000) by the insurance company.
This method also helps prevent insurance misuse by ensuring that policyholders are partly responsible for the costs incurred, promoting cautious utilization of insurance benefits.
Advantages and Disadvantages of Deductible vs. Co-Insurance
| Advantages | Disadvantages |
|---|---|
| Reduced Premiums: Both options can lower monthly or annual insurance premiums. | Higher Out-of-Pocket Costs: Users bear part of potentially high medical costs. |
| Prevents Misuse: Encourages judicious use of medical services. | Variable Costs: With co-insurance, your share increases with the cost of treatment. |
Choosing Between Deductible and Co-Insurance
Deductibles involve a fixed upfront payment, making them predictable but potentially costly initially. Co-insurance, in contrast, varies based on treatment costs but can lead to variable out-of-pocket expenses.
When selecting a health insurance plan, it’s crucial to consider your financial situation and how much risk you’re willing to accept. Plans with higher upfront costs may offer greater peace of mind later, whereas those with lower premiums might necessitate setting aside funds for potential hospital visits.
For more detailed comparisons of deductible and co-insurance plans, consider visiting FELB, which offers free insurance comparison services. This platform can help you find the most suitable health insurance options, tailored to your needs.