Health Insurance Coinsurance

How It Works in Your Policy

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Coinsurance Definition

Coinsurance is when an insurance policy beneficiary shares the cost of the insured service with the insurance company at a predetermined percentage outlined in the coinsurance clause of the policy. In simple terms, you pay part of the cost of the service that is insured and the insurance company pays the other portion. Coinsurance is a common term found in health insurance policies.

The coinsurance clause will indicate what percentage you will pay, and what percentage the insurance company will pay. 

What Does the Percentage Mean?

When an insurance policy contains a coinsurance clause it will be indicated as a percentage. Common coinsurance percentages are 30/70 or 20/80. This would mean that as the insured you pay 20% in a 20/80 coinsurance clause, or 30% of the cost in a 30/70 coinsurance clause. The insurance company pays the majority of the cost at the higher percentage. For example, 80% in a 20/80 and 70% in a 30/70 coinsurance clause.

How Coinsurance Works With a Deductible

Most health insurance policies have a coinsurance clause. The coinsurance percentage is based on the portion of the costs after the deductible has been paid or removed from the total. If your medical bill is $1,500 and you have a $500 deductible, then the portion that the coinsurance will apply to is after the deductible.

So the coinsurance will apply to the $1,000 remaining. At a 20% coinsurance clause, you would first pay the $500 deductible, then the 20% of the remaining $1,000, which is $200 and you could expect the insurance company to pay the remaining $800. Your out-of-pocket expenses would be the combined total of your part of the coinsurance clause portion and your deductible which is $700, the insurance company then pays the $800.

Example of How the Coinsurance Clause Works

Mary had a 20% coinsurance clause on her new health insurance policy. She just got a bill, for her recent surgery, from her health insurance company. The total of the bill was $2,000. Her health insurance deductible was $200 for the year and none of her deductible was paid yet since this was her first claim. This means that Mary would need to pay, out of her own pocket, her full deductible ($200), and then 20% of the remaining amount of the insurance bill ($360). So, her total out of pocket expense for her surgery was $560 ($200+$360).

Three Important Things to Understand About Coinsurance

  1. If you are fortunate enough to have coverage under two health insurance plans, like under a spouse or domestic partner's health insurance plan, and one of them has a different coinsurance clause, then you might be able to get your more of your medical bill covered by strategically combining your health insurance plans using coordination of benefits when you file your health insurance claim. Note that if both benefit plans have the same coinsurance clause, then you will not be able to take advantage of this strategy. For example: John's primary health insurance carrier has a 50/50 co-insurance clause. However, he has dual insurance under his partner Elizabeth's plan which has a 20/80 coinsurance clause. His primary carrier will pay 50% of the cost of his medical services but using a coordination of benefits in his claim he can also use Elizabeth's plan that covers 80% to save money.
  1. If you have already paid the maximum amount you need to pay on your policy for deductibles, you may not have to pay a deductible for the service, and then you will not have to reduce the cost of your deductible before getting the insurance company to pay their portion of the claim according to the coinsurance clause.
  2. Strategically understanding how coinsurance, coordination of benefits and deductibles work on your health plan could save you a lot of money, so be sure to fully read all the conditions of a policy before you make your choice and don't sign a waiver of health insurance for another policy if you aren't sure. Speak to your representative to fully understand your options.