The health insurance system seems overly complicated but some systems such as insurance deductibles cannot be replaced. Insurance deductibles were introduced as a means to prevent fraud and abuse. This becomes clearer once you get a grasp of how they work.
A health insurance policy usually consists of an insurance deductible part and coinsurance or copay. The insurance deductible is defined as a fixed amount that can be different from one insurance company to another. It represents the amount of cash you will have to pay out of your pocket for medical expenses.
The way insurance deductibles work is very simple. For example, you have health insurance with a deductible of $1,500. All medical expenses below that amount will have to be paid by you in full. If your medical expenses exceed that amount, you pay the $1,500 and the remaining amount falls under your coinsurance policy or copay. Coinsurance and copay determine how the rest of the medical bill will be covered and most health insurance companies offer both options. While there are standard plans, they can be customized and every insured person is given the choice to get the plan that covers their needs the best.
The necessity of having deductibles is easy to understand. If for example the health insurance policy does not have deductibles and covers all medical costs, the insured individual may abuse the policy. People may undergo multiple medical procedures or go for unnecessary checks that will be paid by the insurance company. Having deductibles in place ensures that the person insured is seeking medical assistance when needed. Health insurance covers medical costs of necessary medical assistance with policies that protect the company from abuse. Excessive abuse can bankrupt an insurance company which will cause all the insured individuals to lose their coverage due to no fault of their own.