Difficulty: Easy

Average Score: 82%

The PRIMARY purpose of a Coinsurance clause in a Major Medical policy is to:

Rationale

Reducing over-utilization of the coverages.

The primary purpose of a Coinsurance clause in a Major Medical policy is to discourage excessive use of the coverages by requiring the insured to share a percentage of the costs after the deductible has been met. This cost-sharing mechanism aims to promote responsible utilization of healthcare services and prevent unnecessary or frivolous claims.

A (reduce over-utilization of the coverages) CORRECT

This choice is correct. Coinsurance provisions are designed to incentivize policyholders to use medical services judiciously by sharing a portion of the costs, thereby discouraging excessive utilization and helping control overall healthcare expenses.

B (reduce adverse selection) YOUR ANSWER

While coinsurance can indirectly affect adverse selection by influencing how policyholders utilize their coverage, its primary function is not specifically geared towards reducing adverse selection. Adverse selection concerns the disproportionate enrollment of individuals with higher health risks, which is typically addressed through underwriting practices and risk assessment.

C (replace the deductible) YOUR ANSWER

The Coinsurance clause does not serve to replace the deductible in a Major Medical policy. Deductibles and coinsurance are separate cost-sharing mechanisms within insurance policies, with deductibles representing an initial out-of-pocket amount that must be paid before insurance coverage kicks in, while coinsurance involves sharing costs after the deductible.

D (eliminate the need for an Elimination period) YOUR ANSWER

An Elimination period is a waiting period before certain benefits become payable under an insurance policy, particularly in disability insurance. The Coinsurance clause is unrelated to the concept of an Elimination period and does not serve the purpose of eliminating such waiting periods in insurance coverage.

Conclusion

In summary, the primary objective of a Coinsurance clause in a Major Medical policy is to reduce over-utilization of coverages by requiring policyholders to share a percentage of the costs after the deductible has been satisfied. By promoting responsible use of healthcare services, coinsurance helps maintain the sustainability of the insurance system and control healthcare expenditures.

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