Deductibles and Co-insurance

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Learn a bit about deductibles & co-insurance. These are important and having a solid understanding of them could earn you extra marks on your exam.

Hi, everybody, Andre here in the Coaches Hangout. Well, things are finally starting to get back to normal. Speaking of which, I just enjoyed a nice therapeutic massage. On that note, let me ask you a hypothetical question.

If your health insurance plan covered 100% of a massage, would you be more inclined to get one? I’m sure some of you may be thinking, “I’ll take two,” even if you really didn’t need one. Insurance companies know that, so they often require the insured to bear some of the costs. In other words, they want you to have ‘some skin in the game’. For this reason, insurance companies may charge you a deductible, which is a dollar amount that is deducted from each and every claim. Or, the insured could include a co-insurance factor, which requires the insured to pay a certain percentage of the claim. The insurer could even include both.

At See Why Learning, we use a variety of techniques to help you understand and retain what you’ve learned. I can’t sing, at least not very well, but a good catchy phrase can act like a song and get stuck in your head. Let’s look at an exam preparation question and I’ll show you what I mean.

Chris has health insurance through his employer. The policy covers basic dental work, but has an 80% co-insurance factor, 80% paid by the insurer and 20% paid by the insured, and a $50 deductible. Chris had his teeth cleaned, which costs $500. How much of this claim would be covered by the insurer?

A) $450

B) $400

C) $360

D) $350

This is a concept that you either know, or you don’t. If you figured only the deductible is applicable, you would arrive at answer A. If you figure it only the co-insurance factor is applicable, you would arrive at answer B. If you figured you should apply the deductible first, and then the co-insurance factor, you would arrive at answer C. And finally, if you figured you should apply the co-insurance factor first and then the deductible, you would arrive at answer D.

What do you think the answer is? This catchy phrase will help you out. Throughout our study program, we would hammer home the following phrase. “Always deduct the deductible first.” “Always deduct the deductible first.” Catchy, right? It’s even fun to say, go ahead and try.

So we take the $500 eligible claim, and then we deduct the deductible first, and arrive at $450. Next, we multiply $450 by 80% and arrive at an answer of $360. Let’s select answer C. And the answer key says, always deduct the deductible first. It also says $360, so we got it right.

If you want to learn more about insurance concepts, I recommend you consider taking the harmonized life licensing qualification program available I’m going to be taking a little time away from our complementary YouTube channel, leaving it in the hands of our other capable study coaches. During that time, I’m going to be working on some fresh new content for our registered LLQP students. I hope some of you decide to join me.