What Is Coinsurance?

Posted: May 17, 2023

Your health insurance plan includes many different terms and conditions. Each component helps to make health care costs more accessible. By learning more about these terms, you can understand your insurance plan more closely.

Many plans feature cost-sharing options. These features split costs between you and your insurance plan, making expenses more manageable. For instance, coinsurance is the percentage an insured patient pays after satisfying their deductible. You pay a fixed percentage, then your insurance plan covers the remaining costs.

Read on to learn more about coinsurance and how it impacts your insurance expenses.

Coinsurance Defined

Coinsurance is the percentage of medical costs an insured person must pay after meeting their deductible. These expenses could be for hospital stays, office visits, prescriptions, office visits or other health care services. Coinsurance splits the costs between you and your insurer — the percentage is divided between you. A common coinsurance arrangement is that the insurance plan pays 80%, and the insured covers the remaining 20% of expenses.

In health insurance, you must pay your entire deductible before you can access coinsurance. Your deductible is the amount you pay for covered insurance before your plan begins to pay. For instance, you might have a $1,000 deductible for certain health care services. You must cover the total $1,000 before your coinsurance becomes available.

Coinsurance provisions aren’t available for every insurance plan. Plans with coinsurance vary by percentage breakdown. While the 80/20 division is most common, you might also find options like:

• The insured pays 40%, while the insurance plan covers 60%
• The insured pays 30%, while the insurance plan covers 70%
• The insured pays 10%, while the insurance plan covers 90%

The insured person has a lower percentage rate in all situations, making expenses more manageable.

How Does Coinsurance Work?

Examples of coinsurance scenarios can make the concept easier to understand. Let’s say you have a coinsurance percentage breakdown of 80/20 — your insurance plan pays 80% of costs and you cover the other 20%. You might also have an annual deductible of $1,000. If you need surgery that costs a total of $5,000, you could afford the bill by:

1. You pay your deductible: First, you pay your deductible of $1,000. This payment brings your total cost down to $4,000.
2. Your insurance plan pays: Because you paid your deductible, your insurer can cover their coinsurance percentage. They would pay 80% of the remaining $4,000, which is $3,200.
3. You meet the remaining costs: After your insurance pays its portion, you cover the remaining coinsurance percentage of 20%. You would pay $800 in this scenario.

Once you meet your annual deductible, your coinsurance takes effect automatically for all other procedures. For instance, coinsurance percentages would automatically apply if you needed another surgery later in the year because you previously paid the $1,000.

Coinsurance vs. Copayment

It’s important to note the difference between coinsurance and another similar insurance concept — copayments. Your copay is a fixed out-of-pocket fee for health care services. Both options share health care expenses between you and your insurance plan.

Coinsurance and copayments have a few crucial differences:

• Cost type: Coinsurance is a percentage of overall costs, while copayments are a fixed-dollar amount.
• Deductible requirements: You must pay your deductible for your coinsurance to become available. You often pay copays before meeting your deductible.
• Fixed or varied: Coinsurance is set at a fixed percentage for all procedures. In contrast, your copays vary by the type of service you receive. For instance, a copay for surgery would differ from one for a routine check-in with your physician. Many plans offer complete coverage for preventive services like vaccines.

Depending on your health care plan, you might have either option or neither. Some insurance plans don’t require copays for services, but they might charge higher premiums instead. Exploring available insurance options can help you find the best plan for your situation.

Pros and Cons of Coinsurance

If you’re seeking coinsurance options, learning more about the pros and cons can help you make an informed decision. Overall, coinsurance can make health care services more manageable. It offers advantages like:

• Lowered premiums: Because you share service costs with your insurance provider, you can keep premium expenses low. You pay a smaller percentage of the total expense, which makes advanced procedures more affordable. Coinsurance plans are available in many different options, so you can select the percentage breakdown that best fits your needs.
• Great for frequent medical needs: After you pay your annual deductible, you gain coinsurance benefits for the entire year. If you have frequent surgeries or procedures, this setup prevents you from paying a deductible each time. Instead, you only pay a small percentage of the total surgery cost, like in the above example.

However, coinsurance has drawbacks like:

• Must meet deductible first: To gain the benefits of coinsurance, you must pay your deductible first. Your deductible varies based on the plan you choose. If you cannot pay out-of-pocket deductible fees, you have to cover the entire service cost. Your situation might prevent you from meeting your deductible, which could raise your overall expenses.
• Varied expenses: Determining how much you will owe for coinsurance can be challenging. You might only know the total cost of a procedure once it is completed. Prices differ by specific hospitals and the tasks completed. For instance, a surgeon might have to use a specialized tool or process that raises the initial cost. This variation makes it challenging to plan for the expense you must cover.
• Significant percentages: Even though you cover a smaller portion of your services, the expense can still be significant. Surgeries or procedures can cost thousands, making your percentage equivalent to a significant amount of money. If you choose a plan that splits the price more evenly, such as the insured paying 40% of fees, your bill becomes even higher.

Request a Quote From Health for California Today

Understanding essential terms like coinsurance can help you make the most informed insurance decisions. If you’re seeking a new insurance plan, choose Health for California today. We’re committed to helping clients find the best insurance plan for their needs.

We guide you through the entire insurance process, from requesting the initial quote to filling out an application. All of our agents hold licenses from the California Department of Insurance and use their expertise to make insurance as easy as possible. We can assist you with health, dental and vision insurance plans.

To get started with Health for California, get a free quote today.