January 18, 2024

Health care and insurance are full of terms, acronyms and definitions. Coinsurance is one term that causes confusion — often mixed up with copay. Let’s take a quick look at this crucial aspect of your insurance plan. Armed with the basics of coinsurance, you can make informed health care conditions.

The basics

Coinsurance is a cost-sharing arrangement between you and your health insurance provider. Simply put, it represents the amount of health care costs you must pay after meeting your deductible. A copay is a fixed cost you pay for your service or medication. In contrast, coinsurance is a percentage of the total cost of a covered service.

Example:

Let’s imagine your coinsurance rate is 20%. If you get a $1,000 medical procedure after you have met your deductible, you will pay 20%. Your insurance company will pay for the remaining 80%. So, your coinsurance cost for the procedure would be $200.

When will you pay coinsurance?

Once you hit your deductible, you will pay coinsurances for all medical services covered by your plan —until you reach your out-of-pocket maximum. The insurance provider usually covers 100% of all in-network expenses that are approved by the plan after you reach your out-of-pocket maximum.

Note: Your final bill determines the exact amount of coinsurance you must pay for medical services. As a result, the insurance company often bills coinsurance after any charges have been approved.

What medical expenses will have coinsurance?

Coinsurance applies to the medical expenses that you would otherwise have to pay out of pocket. But it does not apply to all insurance charges. Your coinsurance will not apply to your premiums or any noncovered medical services.

One important note — insurance providers will typically only share the cost of in-network services. If you get medical services outside of your provider’s network, chances are you will be responsible for 100% of the cost.

 

Coinsurance can help you save money by sharing your medical expenses with the insurer. However, it is vital to understand the basics of coinsurance, including when it does and does not apply. That way, you can skip the surprise of a big bill that comes straight out of your wallet. If you have any questions, feel free to reach out to one of our benefits experts.