California Life and Health Insurance Practice Exam 2025 – Your All-in-One Guide to Exam Success!

Major Medical policies are designed to provide comprehensive coverage for a wide range of health care expenses, and they typically include various cost-sharing mechanisms that policyholders must understand. The terms deductible, copayment, and coinsurance are standard elements in traditional major medical insurance, each playing a specific role in how costs are allocated between the insurer and the insured.

A deductible is the amount that a policyholder must pay out-of-pocket before the insurance company begins to pay for covered medical expenses. This is a fundamental aspect of most major medical policies, as it defines the policyholder's financial responsibility at the outset of care.

A copayment is a fixed amount that a policyholder pays for a specific service, such as a doctor's visit or a prescription, at the time the service is rendered. It represents a shared cost structure that encourages responsible use of healthcare services.

Coinsurance is the percentage of costs that the policyholder is responsible for after the deductible has been met. Major Medical policies typically have a coinsurance provision, meaning that once the deductible is satisfied, the insurer pays a certain percentage of the covered expenses while the insured pays the rest.

In contrast, capitation is a payment arrangement commonly associated with managed care plans, particularly in health maintenance organizations (HMOs). Under