Final answer:
Benefit schedules set both the limits on covered losses and the maximum reimbursement amounts for an insured person. They include deductibles, copayments, and coinsurance, mechanisms that contribute to cost-sharing and prevent moral hazard, ensuring the insurance system is financially sustainable.
Step-by-step explanation:
Benefit schedules in an insurance plan set the parameters for how costs are shared between the insured person and the insurance company. These schedules outline the limits on covered losses and the maximum reimbursement amounts that a policyholder can expect from the insurer. The answer to what benefit schedules set for an insured is therefore 3) Both limits on covered losses and maximum reimbursement amounts.
Deductibles, copayments, and coinsurance are all mechanisms used in insurance policies to share costs between the insurer and the insured. Deductibles require policyholders to pay a certain amount out-of-pocket before the insurer starts to cover costs. A copayment, often referred to as a co-pay, is a predetermined flat fee that the insured pays for certain services, while coinsurance refers to the percentage of costs that the insured must cover after the deductible has been paid.
These cost-sharing measures are put in place to prevent moral hazard, a situation where the presence of insurance leads individuals to take greater risks or use more services than they would if they bore the full cost of the services. By involving the insured in cost-sharing, these measures help to control overutilization of services and thus keep the insurance premiums at a reasonable level, ensuring that the average payments into insurance cover claims, operational costs, and provide for the insurance company's profits.