What is coinsurance?

Coinsurance is a health plan feature where you and your health plan share the responsibility of your costs. Coinsurance is most common in health plans, but it can also be found in some property insurance policies.

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.

Coinsurance in action

Let’s see how a health plan with coinsurance would work in this fictional example.

Sofia* has a health plan that consists of:

• An 80%/20% coinsurance
• A $1,000 deductible
• A $5,000 out-of-pocket maximum

Sofia goes to the doctor for a covered service that costs $1,500. She has already met her $1,000 deductible for the year. After the deductible, her health plan will cover 80 percent of the allowed amount, which is $1,200 (80 percent of $1,500). This means Sofia will be responsible for the remaining 20 percent, or $300, out-of-pocket, and her health plan will pay $1,200.

If Sofia requires more medical services throughout the year, she will continue to pay 20 percent of the costs until she reaches her out-of-pocket maximum of $5,000. After that, her 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 health plan, but there are a few key differences:

• Copay – A copay is a small, flat fee you pay at the time of service (for example, a $25 copay when you visit your primary care provider).
• 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.
• Cost-sharing – Cost-sharing refers to the amount of money you pay out-of-pocket for health care services. Cost-sharing is more of an umbrella term that may include copayments, coinsurance, and deductibles. 

What to Consider When Choosing a Health Plan that Features Coinsurance

Because health plans with coinsurance require you to pay a deductible before the health plan company pays anything, you typically have more upfront costs.

However, these health plans typically have a lower out-of-pocket maximum, 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, these health plans can protect you financially in case of potentially catastrophic medical expenses.

Choosing the health plan that’s right for you

IBX offers a variety of affordable health plans that fit your budget and health needs, including health plans that feature 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.