What is a Deductible in Insurance?
Definition of Deductible
“Deductible” is the cost that the policyholder needs to pay before the insurance company starts to make reimbursement after making a claim. The insurance company will then pay for the remaining medical expenses according to the coverage scope and limit of the insurance plan.
In simple terms, with deductible, you and the insurance company share the cost of medical expenses. The policyholder pays the deductible, and the insurance company pays the remaining expenses.
In Which Insurance will Deductible Appear?
Deductible are often found in high-end medical insurance plans with reimbursement-basis coverage. They usually offer full coverage and have higher benefit limits.
Does VHIS Have a Deductible?
Many VHIS on the market are high-end medical insurance that offer coverage ranging from HK$2.5 million to HK$20 million per year, and therefore also have a deductible.
How is the Deductible Calculated?
Suppose Mr. Chan👦🏽 is a customer of Bowtie Pink VHIS (Semi-Private) with a deductible of HK$80,000. He needs to undergo a total knee replacement surgery, with surgery costs amounting to HK$340,000*^.
| Cost that Mr. Chan needs to pay by himself | HK$80K |
| Amount of reimbursement from Bowtie | HK$260K |
Regardless of whether Mr. Chan’s medical costs are HK$500,000 or HK$5 million, he only needs to pay the HK$80,000 deductible as the annual benefit limit for this plan is HK$10 million.
- *Assuming that the surgical cost is a qualified expense.
- ^The above data is based on the 90th percentile of the general ward charges for total knee replacement surgery according to the 2021 statistical data from Hong Kong Sanatorium & Hospital.
The deductible for Bowtie Pink is calculated on a policy year basis, which will be reset on each policy renewal date. This means that even if you undergo 2 surgeries with treatment fees that exceed the deductible within one policy year, you will only need to pay the deductible once.
Benefits of Deductibles: Lower Premiums!
Deductibles are common in high-end medical insurance, which their price tends to be a bit more expensive. By having a deductible, you can enjoy lower premiums while obtaining the same coverage.
Continuing with Mr. Chan’s 👦🏽 example, let’s see the difference in annual premiums when he chooses different deductible options.
| A 30-year-old male purchasing Bowtie Pink VHIS (Ward) | ||||
| Deductibles | $0 | $20K | $50K | $80K |
| Annual premiums | $7,152 | $3,648 | $2,496 | $2,232 |
| Amount saved in comparison with premiums of VHIS without deductibles | – | 49% | 65% | 69% |
If Mr. Chan chooses a plan with an HK$80,000 deductible, his annual premiums will be nearly HK$4,920 cheaper than a plan with a HK$0 deductible, saving 69%.
It’s worth noting that deductibles are usually only a few tens of thousands of dollars and only appear when you apply for a claim. But you can use them to reduce your premium expenses.
🎀Tips to Minimize Deductibles
Deductibles can help reduce your premium expenses. But do you know there are ways to lower your deductibles too? With proper planning, you can save tens of thousands of deductibles.
Use Group or Personal Medical Insurance to Reduce Expenses!
Bowtie suggests choosing medical insurance or VHIS with a deductible if you:
- are currently employed and your company provides group medical insurance
- already have basic medical coverage, such as VHIS “standard plan”
So you could choose the coverage there to compensate the deductibles.
Example
Using Mr. Chan’s👦🏽 example again, let’s see how he can use group medical insurance to reduce his deductible expenses.
- Total hospital expenses: HK$340,000
- Deductible paid by policyholder: HK$80,000
- Group medical insurance benefits limit: HK$70,000
Assuming Mr. Chan’s group medical insurance provides a benefits limit of HK$70,000. He can first apply for a claim with the group medical insurance, covering HK$70,000 of the deductible; Then apply for a claim with Bowtie Pink VHIS (Semi-Private).
- Personal medical insurance compensation:
- Total medical expenses – Deductible = $340,000 – $80,000 = $260,000
- Out-of-pocket cost:
- $80,000 – Group medical insurance reimbursement $70,000 = $10,000
In the end, Mr. Chan👦🏽only needs to pay $10,000, reducing his expenses by 87.5%, while maintaining the same annual premiums of $2,232.
Apart from group medical insurance, any personal medical insurance plan without a deductible, such as the Bowtie VHIS Standard, can be used to reduce or replace the deductible expenses. Therefore, individuals who want higher coverage (but without group medical) can consider purchasing a basic VHIS after buying a high-end medical insurance plan to reduce their deductible expenses.
Factors to Consider When Choosing a Deductible
When designing high-end medical insurance, insurance companies usually offer 3-5 deductible options. Before you actually purchase the plan, you need to consider various health and financial factors to find the most cost-effective medical insurance plan for you.
Who should choose VHIS with a "high deductible"?
According to public data from the Health Bureau, there are more than 10 deductible options available in the market, ranging from $8,000 to $250,000.
If we categorize them by using a simple dichotomy approach, HK$50,000 or more are considered “high-deductible” VHIS. For example, if the coverage amount is HK$10 million per year, the monthly premium would be around $208#.
High-deductible VHIS can save you a lot of premium expenses each month. They really suits you if you meet the following conditions:
- already have health insurance that can cover small medical expenses.
- have a lower budget for health insurance premiums.
In addition to these factors, you also need to consider the benefit limit of your existing personal or group medical insurance. If your current insurance can offset the deductible of $50,000 to $80,000, you can pay as little as $208# of premium per month# for a plan that provides $10 million in annual benefit limit.
All medical expenses covered under the plan will be fully reimbursed without having to worry about extra cost.
- #Based on the case of a 30-year-old male who has chosen the Bowtie Pink VHIS (Ward) with an $50,000 deductible.
- 1The Bowtie Pink VHIS provides full compensation for eligible medical expenses, including diagnosis, hospitalization, surgery, and specified non-surgical cancer treatments (excluding the United States), subject to the annual and lifetime policy limits. If the claim involves hospitals outside China's designated hospital network, high-end hospitals within the designated hospital network in China, exceeding the designated room level, or pre-existing conditions prior to enrollment, the compensation amount may be adjusted accordingly.
Yes, but a re-underwriting process may be required in some cases. However, individuals who meet the following conditions can lower their deductible without re-underwriting:
- The policy plan has been continuously in effect for two years or more.
- The insured person is 55, 60, 65, 70, 75, or 80 years old.
Individuals who meet these conditions can apply to lower or cancel their deductible on their birthday or at least 30 days before the policy renewal date without re-underwriting or providing proof of insurability.
