What Is Coinsurance?

Key Takeaways

• Coinsurance is a percentage of a medical cost split between you and your insurance company.

• The coinsurance rate varies depending on your health plan. Typically, your coinsurance can be lower if you pay a higher monthly premium .

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What is Coinsurance?

Coinsurance is a cost-share between you and your health insurance company. The rate is a percentage of a total medical bill split between you and your insurer. For example, your insurance plan may cover 80% of the cost, while you’re responsible for the remaining 20%. 

You are usually required to pay coinsurance costs after you’ve met your deductible and before you’ve reached your out-of-pocket maximum amount. Coinsurance generally applies if you select doctors and hospitals within your health plan’s network. Costs could be higher if you use out-of-network healthcare providers.

How Does It Work?

Here’s an example of when coinsurance rates may apply:

• Deductible: $1,000

• Coinsurance: Insurance pays 80%, while you pay 20%

• Out-of-pocket Annual Maximum: $3,000

Let’s say you were sick with the flu at the beginning of the year, and admitted to the hospital. Your stay cost $1,000. You’ll pay the full $1,000 to reach your deductible. 

In the same year, you broke your leg. This time, your bill is for $2,500. Because you met your deductible earlier in the year, you’re only responsible for 20% of the bill until you reach your out-of-pocket maximum.

Here’s the cost breakdown:

• Total medical bill: $2,500

• Your health insurer pays 80%: $2,000

• You then owe 20% of coinsurance: $500

After two hospital visits, you’ve paid $1,500 of your out-of-pocket costs for the year. Your coinsurance costs (20% for you and 80% from your insurance plan) will continue until you’ve reached your out-of-pocket limit of $3,000. 

What’s the Difference Between Coinsurance and Copays?

Coinsurance and copays are two different ways insurance companies pass on service costs to you. Generally speaking, a copay is a flat rate you pay at the time of service for care, and it applies immediately. Coinsurance usually begins after you have met your deductible.

To explain, here’s an example:

When you visit the doctor, you pay a flat rate called a copay. For example, while a primary care visit may cost $180, you only pay your copay amount for the visit. If your copay for a primary care visit is $20, you pay $20 instead of the $180.

Coinsurance is a percentage split in the cost between you and your insurance company. This takes effect after you’ve met your deductible. For example, if your deductible is $1,000, you pay 100% of your costs until you reach $1,000. After you reach $1,000, you may only be responsible for 20% of your costs (if your plan has an 80/20 coinsurance). This means, after your deductible, you pay 20% and insurance pays 80%.

To explain, let’s use an easy example. If you have a $20 copay and 80/20 coinsurance for a doctor visit that costs $180:

• Your copay would be $20

• Your coinsurance would be $180 before your deductible is met, and $36 after your deductible is met

Sources

• The ‘metal’ categories: Bronze, Silver, Gold & Platinum . HealthCare.gov.

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