Arizona Health Insurance Practice Exam

In health insurance policies, what does the term "deductible" refer to?

1. The amount an insured must pay before coverage begins

2. The fraction that the insurer pays after a claim

3. The maximum out-of-pocket expense for a member

4. The limit of coverage for medical expenses

The correct answer is: The amount an insured must pay before coverage begins

The term "deductible" in health insurance refers to the specific amount that an insured individual is required to pay out-of-pocket for healthcare services before the insurance company starts to cover any costs. For example, if a health insurance policy has a deductible of $1,000, the insured must pay that amount for medical expenses each year before the insurance provider begins to share in the costs. This mechanism is designed to encourage policyholders to be more engaged with their healthcare spending and to help mitigate the insurer's overall risk. Other options describe different concepts relevant to health insurance. The fraction that an insurer pays after a claim pertains to coinsurance, the maximum out-of-pocket expense refers to a limit on how much an insured would pay in total for healthcare during a policy year, and the limit of coverage for medical expenses relates to the caps placed on specific benefits or total claims. Each of these plays a distinct role in the overall health insurance framework, separate from the function of a deductible.