In a health insurance policy, how does an annual deductible typically operate?

Why A is correct

An annual deductible is the dollar amount of covered expenses the insured must pay out of pocket in a policy year before the insurer begins sharing costs. Once the deductible is satisfied, coinsurance and copayments may apply to additional expenses. The deductible renews each policy year, and some services, such as preventive care under many plans, may be covered without applying to it. Understanding how the deductible interacts with coinsurance and the out-of-pocket maximum is central to comparing health plans.

Why the other options are wrong

• B) Having the insurer pay the first fixed amount of every claim while the insured pays the remainder reverses the deductible concept, under which the insured pays covered expenses first.
• C) A flat fee charged for each office visit or service is a copayment, not a deductible; an annual deductible is a yearly dollar threshold rather than a per-service charge.
• D) Paying a percentage of covered expenses after the deductible is satisfied is coinsurance, a separate cost-sharing mechanism from the deductible itself.

Memory hook

Deductible = your first dollars of the year. Coinsurance = your percentage after that. Copay = flat fee per visit.