What is a potential cash management issue with large deductible plans?

Large deductible plans can pose a significant cash management issue primarily due to the need for sufficient cash reserves to cover potential claims that fall within the deductible range. When a policyholder opts for a large deductible, they are assuming a greater share of the risk, meaning they will need to pay out-of-pocket for claims until the deductible amount is met. This requires careful cash flow management and adequate reserves to ensure that funds are readily available when claims arise. If a policyholder underestimates the frequency or size of claims, they may find themselves in a tight financial position, potentially disrupting their operations or leading to additional financial strain.

While other factors like premium costs or misjudging tax benefits may play a role in the overall management of business expenses, they do not directly affect the immediate cash flow requirements to meet unexpected claims. Therefore, the focus on maintaining adequate cash reserves becomes critical in the context of large deductible plans.