Final answer:
A student's prescription coverage typically involves paying an annual premium and meeting a deductible, after which the insurance covers a percentage of prescription drug costs. Copayments, deductibles, and coinsurance are different forms of cost-sharing designed to minimize moral hazard.
Step-by-step explanation:
The question refers to the specific details regarding a student's prescription coverage, within the context of their health insurance policy. Such coverage usually involves the insurance holder paying an annual premium and meeting a deductible, after which the insurance contributes to the cost of prescription drugs. In the example provided, after meeting the deductible, the federal government pays 75 percent of prescription drug costs up to a certain limit, with the policyholder being responsible for the remainder.
For health insurance policies in general, the policyholder might have to pay copayments, a flat fee for services at the time of the visit; deductibles, a set amount to be paid out-of-pocket before the insurer starts to pay; or have a coinsurance agreement, where they pay a percentage of the total costs. These cost-sharing measures are designed to prevent overutilization or moral hazard, in which people with insurance consume more healthcare services because they are not paying the full cost of these services.