Final answer:
The amount of health/dental expenses an employee must pay before insurance benefits will be paid is called the 'deductible'. It is a fixed amount paid out-of-pocket before coverage kicks in, and it may be accompanied by additional cost-sharing mechanisms like co-payments and coinsurance.
Step-by-step explanation:
The deductible is the amount of health/dental expenses an employee must pay before insurance benefits will be paid. This is a fixed amount that policyholders need to pay out-of-pocket before their insurance coverage contributes to the costs of their healthcare services. For instance, an employee may have a deductible of $1,000, which must be paid entirely by the employee before insurance starts covering medical bills.
Furthermore, after the deductible has been met, the insured may still be responsible for other costs such as co-payments or coinsurance. A co-payment is a fixed fee that must be paid for particular services; for example, $20 for an office visit. Coinsurance is a scenario where the insured pays a percentage of the healthcare costs (e.g., 20%), while the insurer covers the rest (80%).
These out-of-pocket costs before insurance benefits apply, including deductibles, copayments, and coinsurance, are designed to reduce moral hazard by ensuring that those insured have an interest in the costs of their care.