If you’ve ever had health, dental, or vision insurance, chances are you’ve heard of coinsurance. But it’s just as likely that you don’t know exactly how to answer the question “what is coinsurance?”.
what is coinsurance and how does it work?
coinsurance is what you, the patient, pay as part of a claim. Coinsurance is a way of cost sharing, or dividing the cost of a service or drug between the insurance company and the consumer. You generally pay coinsurance after you meet your annual deductible. Let’s use a 20% coinsurance as an example.
what does 20% coinsurance mean?
20% coinsurance means that your insurance company will pay 80% of the total cost of the service and you are responsible for paying the remaining 20%. coinsurance may apply to office visits, special procedures and medications.
Suppose you visit a doctor because you have an eye infection.
Scenario #1: If your doctor’s test costs $100, you would pay $20 out of pocket while your insurance company would pay the remaining $80.
Scenario #2: Let’s say your primary care doctor was unable to fully treat your eye infection and had to refer you to an eye specialist. his visit to the specialist cost $120, so he paid $24 (20% of $120) and his insurance company paid the remaining $96 of the bill.
The specialist prescribed some eye medication, so you head to the pharmacy to pick it up. the prescription costs $60, so you are asked to pay $12 out of pocket (20% of $60), with your insurance taking care of the remaining $48.
While the equation may seem simple enough, it’s important to understand the terminology around coinsurance and what you’re obligated to pay under your insurance plan. many plans are different and cover a different percentage of the cost. A licensed insurance agent can help you review your coinsurance options when you’re ready to shop for a new plan.
coinsurance vs. copay: what’s the difference?
You may also have heard of copays. copays (or copays) and coinsurance are very similar except for one key difference: while coinsurance is a percentage of the total cost, a copay is a flat fee.
Let’s continue with the example above. If you received a treatment that required copays instead of coinsurance under your policy, you may be required to pay a flat fee of $20 for the doctor’s visit, whether the doctor billed you $100 or $300.
The trip to the specialist may require a $30 copay, regardless of services rendered. and you may have a $10 copay at the pharmacy to pick up your prescription.
The advantage of a copay is that it allows for greater predictability for the consumer and is generally more affordable. With a copay, you know you’ll pay a set amount to see your doctor for any reason. With coinsurance, you pay a percentage of the visit, so the higher the underlying bill, the more you’ll pay.
Deciding between these small differences can become confusing and time-consuming when comparing copays and coinsurance percentages across health insurance plans. Fortunately, you don’t have to do it alone. Let a licensed insurance agent help you at no cost to you.
coinsurance: a piece of the out-of-pocket puzzle
Coinsurance and copays are what’s known as “out-of-pocket” costs, meaning they’re something extra you have to pay when you get medical care, in addition to your monthly premium. In some cases, your plan may charge a copay for one type of service and coinsurance for another.
To fully understand how out-of-pocket costs work, there are three additional terms to learn: deductibles, out-of-pocket maximums, and annual limits.
A deductible is a fixed amount that you must first pay before your insurance company begins to discount its share. For example, if your policy comes with a $1,000 deductible, it would pay the first $1,000 of your health care expenses during the policy year. once that number has been reached, your insurance company will start paying its portion of the bills.
deductibles do not apply to all services. Many health insurance plans will cover routine services and even prescription drugs. In fact, the Affordable Care Act (ACA) requires that preventive care like annual exams, mammograms, and immunizations don’t require you to pay a copay, coinsurance, or deductible.
High deductible plans generally come with lower monthly premiums, which means you’ll pay less each month for your plan, but you’ll have to pay more out of pocket before your plan starts contributing.