UPDATED: Sep 10, 2013
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Insurance companies have a lot of jargon, and learning what these terms mean is an important step to understanding your policy. One term you may come across frequently is “coinsurance,” which refers to the percentage of a claim you must pay for yourself. Coinsurance is frequently misunderstood, and learning more about it can help you on your way to fulling understanding the costs and benefits of your health care policy.
In general, policies with higher coinsurance will be more affordable. On the other hand, they will also result in higher out-of-pocket expenses when receiving medical care. Balancing the cost of premiums with the cost of medical care will help you determine the appropriate type of policy to suit your needs.
How Does Coinsurance Work?
The first thing to realize about coinsurance is that it is not the same thing as a co-payment or healh care deductible. Coinsurance is an additional out-of-pocket expense that you may be required to pay as part of your policy. For example, imagine that your insurance company requires a 10% coinsurance payment. If you have a laboratory test that costs $100, you would be responsible for paying $10 of the total. This is in addition to any co-payment you are charged for the visit.
Also bear in mind that your coinsurance payment may vary depending on what type of care you receive. For example, you may have no coinsurance for preventative care but will have some for other procedures. Your plan may also require you to pay a higher coinsurance percentage if you receive care outside of your preferred network.
Your coinsurance also counts toward your annual out-of-pocket maximum. This means that every dollar you spend towards coinsurance adds to your total for the year. Once you’ve reached that amount, your claims should be 100% covered until your health insurance calendar resets (usually in January). You will need to check with your insurer to see whether you have an out-of-pocket maximum.
Your coinsurance payment responsibilities generally kick in after you have met your annual deductible. The deductible is what the patient is required to fully pay before an insurance policy contributes towards the cost of care. If you have a $1,000 deductible, you are required to pay the first $1,000 of care before it moves to coinsurance.
Here is an example of how most insurance policies work regarding deductibles, coinsurance and out-of-pocket maximums:
- $1,000 deductible
- 70/30 coinsurance (insurance / patient responsibility)
- $5,000 annual-out-of-pocket
Starting at the beginning of January (typically) the first $1,000 of health care costs are the responsibility of the patient. Once the deductible has been paid, the insurance company will cover 70% of the health care costs until the patient has paid a total of $5,000 throughout the year. Once the out-of-pocket maximum has been met, the insurance company will pay 100% of the remaining covered costs.
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How Much Will My Coinsurance Be?
The exact amount of your coinsurance will vary depending on your policy. A common figure might be a 20% coinsurance in-network and 30% coinsurance out-of-network. You’ll need to check with your insurance provider’s policy details to determine how much you will be expected to pay.
The amount of your coinsurance is one factor that will affect the cost of your policy. Policies with high coinsurance amounts will usually be more affordable as they represent a lower cost for the insurance company. Additionally, you can use funds from a health savings account to help cover the cost of your coinsurance, which can help to lower your overall health care costs.