According to Health Care Risk Management principles outlined by ASHRM and the American Hospital Association Certification Center, both deductibles and self-insured retentions are mechanisms used in risk financing to allocate a portion of loss to the insured organization. However, they function differently in relation to the insurer’s obligation.
A deductible is typically subtracted from the amount paid by the commercial carrier. In many policies, the insurer may pay the full claim amount and then seek reimbursement of the deductible from the insured, or the insured may pay the deductible portion while the insurer handles defense and indemnity payments above that amount. The key distinction is that coverage attaches immediately, but the insured ultimately bears the deductible portion.
A self-insured retention differs in that the insured must satisfy the retention amount before the insurer’s coverage is triggered. Until the retention is exhausted, the insured is responsible for payment and often for defense management.
Option B incorrectly describes a deductible as operating like a self-insured retention. Option C does not distinguish between the two mechanisms. Option D is incorrect because self-insured retention applies before, not after, carrier limits.
Therefore, the correct distinction is that a deductible is subtracted from amounts paid by the commercial carrier.
