Health Coverage Limits
Coinsurance requires the employee to pay a percentage of the expense. As such it motivates the employee to shop for value and scrutinize the bill.
Unlike deductibles, coinsurance keeps pace with inflation and discourages high utilization. Coinsurance is effective at controlling claims for elective products or services.
A concern with coinsurance is that the financial burden for high claimants may be too great. One solution is to limit the total coinsurance to a maximum dollar amount per year.
Health and dental plans normally stipulate what expenses are eligible for reimbursement. Costs can be reduced by restricting certain expenses that are not cost effective in maintaining adequate health care.
Some employers have decided not to provide catastrophic coverage through their group health and dental programs. They view these benefits as prepaid benefits to cover the cost of routine services. Annual maximums on drugs, hospital and dental limit liability for the few who may have excessive claims. This results in cost-shifting to government plans, community programs and employees.
High deductibles control costs effectively when the primary focus of the benefit is to insure against infrequent, high cost expenses.
Annual deductibles eliminate the claim and processing cost for employees who do not exceed the deductible.
A valid criticism of deductibles is that they penalize employees with low claims.
The most common deductible is $25 per individual each calendar year with the maximum deductible per family equal to twice the individual deductible. Most policies permit expenses incurred during the last 3 months of the calendar year that were used to satisfy the annually deductible also apply toward the next calendar year's deductible.
The dollar value of deductibles should be adjusted periodically to reflect the erosion by inflation.
The effects of trend and inflation factors are amplified for a plan with deductibles. This is because the cost increase is calculated as a percentage of the expense yet applied to only the amount claimed.