What Is Coinsurance in Health Insurance and How Is It Calculated?
What Role Does the Deductible Play?
Shanti
9/30/20262 min read
What Is Coinsurance in Health Insurance and How Is It Calculated?
When choosing a health insurance plan, the monthly premium is not the only cost you should consider. One important term that can significantly affect your healthcare expenses is coinsurance.
But what exactly is coinsurance, and how is it different from a deductible or copay?
What Is Coinsurance?
Coinsurance is the percentage of the cost of a covered healthcare service that you typically pay after meeting your deductible.
For example, if your health insurance plan has 20% coinsurance, after you have met your deductible, you will generally pay 20% of the allowed cost for services subject to coinsurance, while your insurance company pays the remaining 80%.
It is important to understand that coinsurance is usually calculated based on the insurance company’s allowed amount, not necessarily the amount originally billed by the doctor or healthcare facility.
A Simple Example
Suppose the insurance company’s allowed amount for a medical service is $1,000.
Your plan has 20% coinsurance, and you have already met your deductible. In this situation:
Your share: $200
Insurance company’s share: $800
Because coinsurance is a percentage, the amount you pay can increase as the cost of the medical service increases.
What Is the Difference Between Coinsurance and a Copay?
These two terms are sometimes confused.
A copay is usually a fixed dollar amount. For example, your plan may require a $30 copay for a primary care doctor visit.
Coinsurance, on the other hand, is calculated as a percentage of the cost. For example, your plan may require you to pay 20% of the allowed amount for an MRI after meeting your deductible.
Simply put:
Copay = A fixed dollar amount
Coinsurance = A percentage of the cost
What Role Does the Deductible Play?
A deductible is the amount you generally have to pay out of pocket for services subject to the deductible before your insurance company begins paying its share of those services.
For example, suppose your health insurance plan has:
$3,000 deductible
20% coinsurance
If you have not yet met your deductible, you may first be responsible for paying the cost of services subject to the deductible until you reach that amount.
After you meet your deductible, coinsurance typically applies, and the cost of applicable services is shared between you and your insurance company.
What Is the Out of Pocket Maximum?
Another important number to understand in health insurance is the out of pocket maximum.
This is the maximum amount you are required to pay during a plan year for eligible covered healthcare expenses.
In general, eligible deductible payments, copays, and coinsurance can count toward your out of pocket maximum.
Once you reach your out of pocket maximum, your health insurance plan pays the cost of eligible covered services for the remainder of the plan year according to the terms of your plan.
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