Coinsurance, a term found in every health insurance policy, is your out-of-pocket expense for a covered medical or healthcare cost after the deductible, which generally renews annually, has been paid on your healthcare plan.
Generally expressed as a percentage amount and outlined in the coinsurance clause of the policy, coinsurance allows the policyholder to share the cost of the insured service with the insurance company—your insurance company pays the portion of the cost of the service that is insured, and you pay the remainder.
- Coinsurance is your out-of-pocket expense for a covered cost after you have paid the deductible on your healthcare plan.
- The insurance company generally pays a greater percentage of any medically necessary healthcare service, and you pay the rest.
- If you have two health insurance plans, and one has a different coinsurance clause, you may be able to coordinate benefits to cover more of the cost.
- Once you meet your annual deductible, you will only be responsible for the coinsurance amount listed in your policy.
Coinsurance Percentage Breakdown
The insurance company generally bears a higher burden, paying the majority of the cost (the greater percentage) of any medically necessary healthcare service.
Common divisions are 70/30 or 80/20, wherein your insurance company would pay either 70% or 80%, and you would pay the remaining 20% or 30%, respectively, out of pocket, after the deductible is met.
If your medical bill is $1,500, and you have a $500 deductible, the portion of the bill to which coinsurance will apply is $1,000. With a 20% coinsurance clause, you would pay $700 ($500 + $200 [20% of remaining $1,000]).
The sum total, $700, is known as your "out-of-pocket" expense. The insurance company, paying the majority of the cost at the higher percentage, would pay the remaining $800.
Your Coinsurance at Work for You
If you are fortunate enough to have coverage under two health insurance plans (for example, under a spouse or domestic partner plan), and one of them has a different coinsurance clause, one plan acts as the primary plan when filing your health insurance claim. In most cases, the primary plan's coinsurance will apply to your expenses first, and the secondary plan's coinsurance will apply to anything your primary plan hasn't paid for. The process of using two insurance plans to cover a cost is called "coordination of benefits."
It's important to note that those enrolled in Medicare may want to check with their providers and coverages first as the coordination of benefits may be different across different scenarios and to ensure your bills are sent to the right payers, in the right order.
Policy deductibles renew and are paid annually. In other words, once your required annual deductible is paid each year, you will only be responsible for the coinsurance amount ("co-pay") listed in your policy for the remainder of that year.
Understanding how coinsurance, coordination of benefits, and deductibles work on your health plan can save money each year. It's important to fully read all conditions of a policy before you make your choice or sign a waiver of health insurance, for any policy. If you have questions, speak to your representative to fully understand your options.