Coinsurance is a health plan feature where you and the health plan share the responsibility for your costs, after you’ve met your deductible.
How does coinsurance work?
Here are some key terms to remember when considering a health plan with coinsurance:
Deductible: First, you must meet your deductible, or out-of-pocket amount, in full before your health plan starts to pay anything.
Coinsurance ratio: After you meet your deductible, your coinsurance starts to apply. For example, if you have a health plan with 80%/20% coinsurance, your health plan would pay 80 percent of the costs of covered medical services. You are responsible for the remaining 20 percent.
Out-of-pocket maximum: There is usually a limit on how much you are required to pay out-of-pocket in a plan year. Once you reach this out-of-pocket maximum, your health plan typically covers 100 percent of any covered medical expenses for the rest of the plan year.
Example of coinsurance
Let’s see how a health plan with coinsurance would work in this fictional example.
Aaron* has a health plan that consists of:
- An 80%/20% coinsurance
- A $1,500 deductible
- A $6,000 out-of-pocket maximum
Aaron has outpatient surgery early in the year that costs $6,500. He will pay the initial $1,500 deductible, which leaves $5,000 remaining. His health plan will pay 80 percent of that ($4,000), which leaves 20 percent, or $1,000, for Aaron to pay (in addition to his deductible).
If Aaron requires more medical services throughout the year, he has already met his deductible, so he will continue to pay 20 percent of the costs of covered services until he reaches his out-of-pocket maximum of $6,000. After that, his health plan will cover 100 percent of any covered services for the remainder of the policy year.
Coinsurance vs. copay vs. cost-share
The terms coinsurance, copayment (copay), and cost-share can be confusing. These terms are all ways that you share the cost of health care with your insurance plan, but there are a few key differences:
- Coinsurance – Coinsurance is a percentage of the total cost of health care. The actual dollar amount will vary. (For example, the health plan pays 80 percent of your dermatology bill, and you pay the remaining 20 percent.) Coinsurance only kicks in after you meet your deductible. For coinsurance, you will be billed by the provider, who you will pay directly.
- Copay – A copay is a small, flat fee you pay at the time of service. (e.g., a $25 copay when you visit your primary care provider.)
- Cost-share – Cost-share refers to the amount you pay out-of-pocket for health care services. Cost-sharing is an umbrella term that may include copayments, coinsurance, and deductibles.
Pros and cons of coinsurance
Since health plans with coinsurance require you to pay a deductible before the health plan pays anything, you typically have more upfront costs.
However, with a health plan that features coinsurance, the out-of-pocket maximum is generally lower, so it’s more likely you’ll meet your maximum earlier in the year. This means the health plan will pay 100 percent of covered services for the rest of the year.
Although these health plans may cost more upfront, they can protect you financially in case of catastrophic medical expenses.
Choosing the plan that’s right for you
AmeriHealth offers a variety of affordable plans that fit your budget and health needs, including health plans with coinsurance. When choosing a health plan, make sure to consider not just the monthly premium but also the cost to use your benefits.
*Not a real member. Name used for this example only.