Which statement is an advantage of a large deductible plan?

Which statement is an advantage of a large deductible plan?

• A. Cash flow incentive
• B. Higher net cost vs retro programs
• C. No need for loss control services
• D. All of the above

Answer: (A)

In a large deductible plan, the employer pays losses up to a set deductible, while the insurer handles losses above that amount. This structure lowers the fixed premium because the insurer takes on less risk upfront, improving cash flow for the employer. That cash flow improvement is the main advantage, since you get smaller, more predictable premium payments and only incur the deductible if a loss occurs. The other ideas don’t fit as advantages. A larger deductible doesn’t inherently mean a higher net cost versus retro programs; it depends on actual losses and timing, but the benefit is typically the lower fixed premium rather than higher costs. And loss control services are generally still important—employers often engage in loss control to reduce claim frequency and severity, since they bear the initial losses up to the deductible. So the best answer highlights the cash flow incentive as the primary benefit of a large deductible plan.

In a large deductible plan, the employer pays losses up to a set deductible, while the insurer handles losses above that amount. This structure lowers the fixed premium because the insurer takes on less risk upfront, improving cash flow for the employer. That cash flow improvement is the main advantage, since you get smaller, more predictable premium payments and only incur the deductible if a loss occurs.

The other ideas don’t fit as advantages. A larger deductible doesn’t inherently mean a higher net cost versus retro programs; it depends on actual losses and timing, but the benefit is typically the lower fixed premium rather than higher costs. And loss control services are generally still important—employers often engage in loss control to reduce claim frequency and severity, since they bear the initial losses up to the deductible.

So the best answer highlights the cash flow incentive as the primary benefit of a large deductible plan.