Coinsurance is the percentage of healthcare costs that the insured pay after meeting their deductible. It is the percentage of their medical costs that they have to pay. The amount of coinsurance depends on the type of health plan and the carrier offering that plan. On availing of any healthcare service, policyholders are required to pay out of pocket until they spend a certain amount, known as their deductible. It is only after the policyholders meet the deductible amount, their insurance carriers start paying some of the cost of their healthcare. However, the insurance carriers don’t pay for all of the healthcare costs, rather the costs of the healthcare are divided between the insurer and the insured, and policyholders are required to pay a certain percentage of their bill, which is known as their coinsurance. With coinsurance, the costs of the healthcare services are divided between the insured and insurer until the policyholders reach their out-of-pocket maximum. For instance, if a health plan has a 20% coinsurance, then the insured will need to pay 20% of each healthcare cost, and the health insurance carrier will cover the remaining 80% of the costs.
The Amount Insured Pay for Coinsurance?
The amount which policyholders are required to pay for coinsurance depends on the specific health insurance plan. For instance, if a health plan has a 20% copay, then it means that the policyholders will have to pay 20% of the healthcare costs, and their insurance carriers will cover the remaining 80% of the healthcare costs. If a policyholder pays a visit to the doctor and needs to undergo a minor surgery that cost around $200. If the policyholder has already hit his deductible amount and his coinsurance is 40%, then he will have to pay $80 and his carrier will pay the remaining $120. Generally, a health plan with a higher monthly premium has a lower coinsurance, and a plan with lower monthly premiums has higher coinsurance.
Coinsurance and Copay is the Two Different Things
It is seen that health insurance consumers often get confused between coinsurance and copay and consider both the same, whereas there is a huge difference between the two. A copay is a set amount of money that the insured pays on receiving a specific healthcare service whereas coinsurance is a percentage of a healthcare fee and it tells the insured the final medical bill amount that the insured has to pay. For instance, if a health plan has a $20 copay, then the insured just has to pay $20 irrespective of whether the doctor charges $100 or $300 for a checkup. However, if a health plan has 20% coinsurance and a medical procedure costs $100, then the insured will need to pay $20 and if a medical procedure costs $200, then the insured will have to pay $40 as coinsurance.
A Quick Overview on Coinsurance and Copay
|How it is calculated||A set percentage of healthcare costs||It is a fixed amount charged for every healthcare service|
|Does it depends on the healthcare service received||No, the coinsurance percentage is fixed and it remains the same for all healthcare service||Yes the copay amount varies depending upon the received healthcare service|
|Is it paid before or after meeting the deductible?||Yes coinsurance is paid only after the insured meet their||Copay can be paid either before or after depending on the service|
|Counted toward out-of-pocket maximum||yes, coinsurance is counted towards it||yes, in most of the plans, the copay is counted toward the out-of-pocket maximum|
How Does Coinsurance Work?
The policyholders need to understand how does coinsurance works, and for this, they need to understand that they pay for healthcare expenses in phases. The initial phase of paying for healthcare expenses start with the deductible phase. The policyholders need to understand that before the start of their health coverage, they have to pay for all their healthcare costs until they meet their deductible amount. For instance, if an insured has a health plan with a $1000 deductible, then the insured will first have to spend $1000 on healthcare expenses from their pocket before their health insurance coverage kicks in. Thus, the insured need to have sufficient money as savings to cover their deductible amount. After meeting their deductible amount, the insured enters the next phase which is the coinsurance phase. During this phase, the cost of healthcare is divided between the insurer and the insured. If a person has an 80/20 coinsurance plan, then he will be responsible to pay only 20% of the medical expenses and the rest 80% of the cost will be paid by the insurance carrier. The insured will keep paying their coinsurance rate until they reach their out-of-pocket maximum. Then the insured enters the last phase which is the out-of-pocket maximum phase. Once the insured hit their out-of-pocket maximum, then the insurer will pay for 100% of the medical expenses for the remaining part of the year, and the insured will just need to pay their monthly premium.