Many people wonder what is coinsurance in health insurance and how does it work? Is it the same as a deductible and who has to pay it?

We know it can seem confusing all the terms you hear with health insurance, but when you break it down, it’s easy to understand and choose the right insurance for you and your family.

man trying to determine is his annual deductible on paper

How Does Health Insurance Work?

Whether you secure health insurance from your employer’s group plan or you get it from the Marketplace yourself, it works the same.

You’ll pay a premium for the insurance. This is the monthly cost you must pay to have coverage. If you miss your premiums, you don’t have coverage.

Besides the premiums, you’ll have a deductible, copays, and coinsurance. The deductible is the amount you pay first before insurance covers anything and your copay is what you pay for health care service outside of your deductible.

But what is coinsurance in health insurance? It’s something most people don’t understand but that plays an important role in your choice of health insurance.

What is Coinsurance?

Coinsurance is the money you owe for a medical service after you meet your deductible. The insurance company will pay a specific percentage and you pick up the rest. For example, if you have 70/30 health insurance for doctors visits, your insurance provider will pay 70% of the covered services after your deductible and you’re responsible for 30%. Some insurance plans have different coinsurance amounts for things like an emergency room visit or digital imagery tests.

The nice thing about having health insurance is the insurance company has negotiated rates with the medical providers within their network. Even if you pay 30% of the allowed expenses, it’s usually a lesser amount than you’d pay if you didn’t have a health insurance plan.

How Does it Work?

Your coinsurance doesn’t kick in until after you meet your annual deductible. The deductible is the amount you must cover first.

For example, if you have a $2,000 deductible, you pay the first $2,000 in medical expenses except those that have a co-pay only (more on this below). Once you hit $2,000 in medical expenses, your insurance will start.

This is where coinsurance matters. You’ll split the costs with the insurance company according to the copay percentage you agreed to. Most insurance companies offer an 80/20 or 70/30 plan, but you’ll find coinsurance options in many denominations, sometimes even 100/0.

Your coinsurance, like your annual deductible, directly affects your premiums. The higher the percentage of your medical expenses the insurance company covers, the higher the premiums you’ll pay.

How do you Determine your Coinsurance Amount?

Choosing your coinsurance amount is a big decision. Before you decide which percentage is right for you, determine the following:

How much can you afford? Choosing a higher coinsurance amount for a lower premium may seem great at first, but when it comes down to paying for your medical expenses, can you afford the higher percentage?

How often do you go to the doctor? If you only go to the doctor occasionally, you may get away with a higher coinsurance amount since you won’t have many medical bills to cover. But, if you have a condition or visit the doctor frequently, you may benefit more from the lower coinsurance amount.

Is your doctor in the network? Make sure you find an insurance plan where your doctor is in-network. If you don’t and you see that doctor, you’ll have higher coinsurance amounts to cover. Consider this as you choose the right insurance plan.

What’s the difference Between Coinsurance and the Annual Deductible?

Coinsurance and deductible often get confused. It’s easy to see why. They are both your responsibility, but coinsurance doesn’t become an issue until you meet your deductible.

Let’s say you have a $2,000 deductible and you go to the doctor. The bill is $500. You would owe the entire $500 or the amount your insurance company determines is acceptable according to their agreement. The insurance company wouldn’t cover any of it, so you’d owe 100% of the costs.

This would continue until you spend $2,000 on medical bills. Once you hit that point, your insurance would cover your expenses according to your coinsurance. Let’s say after spending $2,000, you have another $1,000 in medical bills and you have an 80/20 plan.

Your insurance company would pay $800 of the $1,000 bill and $200 would be your responsibility.

Both your deductible and coinsurance are in addition to your monthly premium that you must pay whether or not you use the insurance.

What’s the Difference Between Coinsurance and a Copay?

One more term many people confuse with coinsurance is the copay. The copay is a predetermined amount you owe each time you have a specific service.

For example, if your insurance requires a $40 copay when you see your primary care physician and a $50 copay when you see a specialist, you’d pay those amounts each time you see the doctor.

A copay doesn’t count toward your deductible – it’s a separate cost. You pay them every time you go to the doctor even if you’ve met your deductible.

Some plans have a co-pay and coinsurance amount for the same services. For example, you may have a $40 copay to see the doctor plus 80/20 coverage.

Final Thoughts

Always read the fine print when choosing your health insurance. Coinsurance is a big part of the decision. You must know what it will cost you to see the doctor, have surgery, or have medical treatments.

Choose the insurance policy with the premiums you can afford each month, a deductible that won’t make you struggle financially, and a copay amount you’re comfortable covering every time you go to the doctor.

There isn’t a perfect copay amount that’s right for everyone. Think of your situation and what you don’t mind paying out of pocket for medical services and choose your policy with that in mind.

shannon kennedy, president SASid

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About the author

Shannon Kennedy, Licensed Insurance Agent

With a passion for insurance since he was in high school, Shannon Kennedy received his life & health license at the age of 18.  SASid is a nationally licensed and recognized health insurance agency sincerely helping people access and understand insurance. We don’t want you to be intimidated. Contact our Support Center for answers to your questions.

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Call Shannon at 855-826-0030