What is Coinsurance?
Coinsurance is a cost-sharing arrangement in health insurance where the insured individual is responsible for a percentage of covered medical expenses after meeting the deductible. It is a form of out-of-pocket expense that the insured person pays, usually expressed as a percentage (e.g., 20% or 30%). After the deductible is satisfied, the insurance company and the insured share the costs of covered services according to the coinsurance percentage. For example, if the coinsurance is 20% and the medical service costs $1,000, the insured would pay $200 (20% of $1,000) while the insurance company would cover the remaining $800. Coinsurance helps individuals share the financial responsibility of healthcare expenses with the insurance company and can vary based on the specific health insurance plan and the services received.
Coinsurance vs. Deductibles and Copayments
Health insurance plans typically have cost-sharing features. Cost-sharing means that you pay a portion of your medical expenses, and the health insurer pays its portion of your medical expenses. Coinsurance is one form of cost-sharing. Deductibles and copayments are two other common forms of cost-sharing.
- Coinsurance is the percentage of the medical expense you and the insurer each pay for services covered by the plan.
- Deductibles are a dollar amount you must pay for most covered medical services before your health plan pays any amount.
- A health insurance copayment is a dollar amount you have to pay each time you receive a covered medical service.
Does coinsurance count towards deductible?
Yes, coinsurance payments typically count towards meeting the deductible. When an individual incurs medical expenses and pays coinsurance, the amount they pay is generally applied to their deductible. Once the deductible is met, the insurance coverage begins, and coinsurance is usually required for subsequent covered services. So, the coinsurance payments contribute towards reaching the deductible threshold, after you’ve met your deductible the insurance coverage kicks in. It’s important to review the specific terms and conditions of the insurance policy to understand how coinsurance applies towards the deductible in a particular plan.
How does coinsurance work?
In coinsurance arrangements, the insured individual and the health insurance plan share the costs of covered medical expenses after the deductible has been met. The coinsurance ratio specifies the percentage that the insured individual is responsible for paying, while the health plan covers the remaining portion. Typically, the percentage that the insurer pays is higher than the individual’s portion. For example, a common coinsurance ratio is 80/20, where the insurer pays 80% of the covered expenses, and the insured pays the remaining 20%. This setup ensures that the insurance plan assumes a larger portion of the costs, providing financial protection to the insured individual while still requiring them to contribute a smaller share.
What does 20% coinsurance mean?
In an 80% / 20% coinsurance health plan, that means the insurer pays 80% of the allowed medical expense, and you pay 20% of the allowed medical expense.
The same principle applies if the coinsurance is different. For example, if a plan provides 50% / 50% coinsurance, the insurer pays half of the allowed medical expense, and you pay the other half. Obviously, in this case, your out-of-pocket expenses are greater than in the scenario where the plan covers 80% of the medical expense
Other common coinsurance arrangements:
Here’s a table showing different levels of coinsurance and the corresponding amounts that the health plan will pay and the individual will pay for a $1,000 bill after the deductible has been met:
| Coinsurance Level | Insurer Pays | Insured Pays |
| 90% / 10% | $900 | $100 |
| 80% / 20% | $800 | $200 |
| 70% / 30% | $700 | $300 |
| 60% / 40% | $600 | $400 |
| 50% / 50% | $500 | $500 |
| 40% / 60% | $400 | $600 |
| 30% / 70% | $300 | $700 |
| 20% / 80% | $200 | $800 |
| 10% / 90% | $100 | $900 |
Please note that these amounts are for illustrative purposes only and may vary depending on the specific terms and conditions of the health insurance plan.
Video: How does coinsurance work?
Factors impacting coinsurance
Understanding the factors that influence coinsurance can help you better manage your healthcare costs. Coinsurance, the percentage of costs you pay after meeting your deductible, can vary significantly based on several key elements:
- Plan Design and Coverage Levels: Different health plans, including the scope of coverage, can determine the coinsurance rates you face. More comprehensive plans might offer lower coinsurance rates, reflecting higher premiums, while less expensive plans might shift a higher cost-share to you.
- Type of Health Insurance Plan: The kind of plan you choose, such as an HMO (Health Maintenance Organization) or a PPO (Preferred Provider Organization), impacts coinsurance. HMOs might have lower coinsurance rates but restrict your care to network providers, whereas PPOs offer more flexibility in choosing providers but typically come with higher coinsurance rates.
- Network Providers and Out-of-Network Care: Staying within your insurance plan’s network usually means lower coinsurance payments. Seeking care outside your network can significantly increase how much you pay, as out-of-network services often carry higher coinsurance rates.
- Location/Geographic Variations: Where you live can also affect your coinsurance due to regional differences in healthcare costs and insurance coverage norms. Areas with higher medical costs may see corresponding adjustments in insurance plan terms, including coinsurance rates.
Coinsurance and maximum out-of-pocket.
You might be wondering, “how does my out-of-pocket maximum work?”. This refers to the maximum amount of money you have to pay out-of-pocket. Coinsurance counts towards your out-of-pocket maximum.
Once you have met your out-of-pocket maximum, you should not have to pay coinsurance anymore. Your health insurance company should be responsible for all remaining expenses.
Managing coinsurance costs
Effectively managing coinsurance costs is key to keeping your healthcare expenses manageable. Here are several strategies to help you minimize coinsurance expenses:
- Choose the Right Plan: Select a health plan that balances premium costs with out-of-pocket expenses like coinsurance. Sometimes, paying a slightly higher monthly premium can result in significantly lower coinsurance rates.
- Utilize HSAs and FSAs: Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) allow you to set aside pre-tax dollars to cover medical expenses, including coinsurance. These accounts can reduce your taxable income and help you save on healthcare costs.
- Leverage Telemedicine: Take advantage of telemedicine services offered by your insurance plan. Telemedicine can be a cost-effective alternative to in-person visits, often featuring lower coinsurance charges for routine consultations and follow-ups.
- Stay In-Network: Always aim to use in-network healthcare providers. Insurers negotiate lower rates with in-network providers, which translates into lower coinsurance payments for you.
- Explore Alternative Care Options: Investigate alternative care options that might be covered under your insurance, such as urgent care centers or community health clinics, which can be less expensive than hospital visits.
By understanding and utilizing these strategies, you can better manage your coinsurance costs, making your healthcare more affordable without compromising on quality.
Coinsurance example
For example, you might have a health insurance plan that has a $1,000 annual deductible, an 80% / 20% coinsurance that applies to all covered services, and a $6,000 out-of-pocket maximum cap on your annual expenses for covered medical care and services.
To illustrate how coinsurance and the other cost-sharing features of your health insurance plan work, assume the first time you use your health insurance during the year is when you are admitted to the hospital. You incur $50,000 in medical expenses from the hospital.
- You pay your $1,000 deductible.
- That leaves you with $5,000 of financial responsibility for covered medical expenses before you reach the plan’s maximum out-of-pocket cap of $6,000 for the year.
- With 20% coinsurance, you pay 20% of the expense while the insurer pays 80%.
- Once you’ve paid your $1,000 deductible and $5,000 in coinsurance, you’ve reached your $6,000 out-of-pocket maximum for the year. Altogether, you pay $6,000 with this medical bill, and your insurer pays $44,000. It’s likely you will not have to pay coinsurance for covered services for the balance of the year.
Because cost-sharing varies from one health insurance plan to another, you’ll want to make sure you understand the details of your health insurance plan before you need to use your coverage. If you have questions about coinsurance and your out-of-pocket maximum, you should reach out to a professional affiliated with your insurance plan. If you go through eHealth to find health insurance, our licensed insurance agents are available to help you before, during, and after to make sure you understand your policy.
Benefits and Considerations of Coinsurance Plans
When evaluating coinsurance options in health insurance plans, there are several factors to consider. One important aspect is understanding the benefits and considerations of coinsurance plans. Coinsurance can offer cost-sharing flexibility and allow individuals to share medical expenses with their insurance provider. However, it’s crucial to examine factors such as the percentage of coinsurance, maximum out-of-pocket limits, and potential financial implications to make an informed decision.
High coinsurance plans
Most high coinsurance health plans tend to have lower monthly premiums. If you anticipate only needing preventive care, which is covered at 100% under most plans when you stay in-network, then the lower monthly premiums that often accompany high coinsurance plans may help you save money.
Low coinsurance plans
Mitigating Out-of-Pocket Burden. Opting for a low coinsurance health insurance plan can help alleviate the financial strain of out-of-pocket medical expenses. Compared to high coinsurance plans, low coinsurance plans typically entail lower cost-sharing responsibilities, reducing the amount you have to pay for covered healthcare services. This is especially beneficial if you have frequent visits to primary care doctors or specialists for chronic conditions or anticipate potential hospitalization due to unexpected illnesses or injuries.
Predictable and Budget-Friendly. Low coinsurance plans offer more predictability and ease of budgeting for healthcare expenses throughout the year. With lower cost-sharing obligations, you can more accurately forecast and plan for the medical care costs you are likely to incur. This provides greater financial stability and helps you manage your healthcare expenses more effectively.
Consider Personal Health and Finances. When evaluating healthcare plans, it is crucial to assess your personal health needs and financial circ*mstances. Consider factors such as the frequency of doctor visits, expected healthcare costs, and your ability to handle higher out-of-pocket expenses. By carefully weighing these factors, you can determine whether a low coinsurance plan is a suitable option for your specific situation.
Remember, making an informed decision about coinsurance plans involves considering both your healthcare requirements and your financial capabilities.
How to calculate coinsurance?
First you have to check and see what percentage of your medical bill you are responsible for. You can find those details in the documentation for your insurance plan. This number will be used to figure out your individual medical costs.
For example, if your policy says your coinsurance is 20%, that means you are responsible for 20% of the bill. Remember that coinsurance will only kick in after you have already met your deductible. Then, you will continue paying coinsurance until you hit your out-of-pocket maximum. Once you hit your out-of-pocket maximum, you should not be responsible for any further medical expenses.
It can be confusing to find this number in your medical plan information, so you should reach out to a professional who can help you if you need clarification.
Coinsurance Based on Plan Tiers for ACA
ACA-compliant health insurance plans are usually divided into metal levels. Depending on the metal tier your plan falls into, how much your provider covers versus how much you’re expected to pay will vary. Here’s a general overview of how this typically works:
- A bronze plan is expected to cover approximately 60% of your health expenses.
- A silver plan should cover approximately 70% of your plan’s expenses.
- A gold plan should be responsible for covering approximately 80% of your health expenses.
- A platinum plan should cover approximately 90 percent of your medical expenses.
If you have questions about how coinsurance and health insurance tiers work, we can help you find the right healthcare coverage to meet your needs. A member of our team is always standing by to assist you, and we will work with you carefully to make sure you have the right health insurance coverage. Reach out to us today.
Coinsurance frequently asked questions
What does coinsurance in network mean?
Coinsurance in network refers to the portion of the cost of covered medical services that an individual is responsible for paying after meeting their deductible, when they receive care from healthcare providers who are part of their insurance plan’s network. In network refers to healthcare providers, hospitals, and facilities that have agreed to provide services at negotiated rates with the insurance plan. When a person receives care from in-network providers, the coinsurance amount they owe is based on the predetermined percentage specified in their insurance policy. This means that the individual will pay a portion of the cost, while the insurance plan covers the remaining portion, subject to any applicable copayments, deductibles, or maximum out-of-pocket limits. Coinsurance in network offers individuals the advantage of accessing care from a network of providers that have agreed to offer discounted rates, potentially resulting in lower out-of-pocket expenses compared to out-of-network care.
Does coinsurance count towards prescription drugs?
Coinsurance also applies to prescription drugs. For example, if you have an 80% / 20% coinsurance split with your health insurance company, you will be responsible for 20% of the total cost of your prescription drugs.
This means that if you go to the pharmacy and have to pay $100 for your medication, the insurance company will cover $80. Then, you will be responsible for paying the other $20. It is important for you to take a close look at your health insurance policy to ensure you adequately understand when you have to pay for your prescription drugs and how much money you have to pay.
