Coinsurance is the percentage of costs of a healthcare service you’re required to pay after you’ve hit the deductible on your health insurance plan.1 This is different from a copay2, which is a fixed fee you’re required to pay for certain services.
For instance, you might owe a $25 copay each time you see your primary care physician for an ailment. Coinsurance, on the other hand, is a percentage of health care costs rather than a flat fee.
What You Need to Know
- Coinsurance only applies after you’ve hit your healthcare plan’s deductible, which is the amount you pay for covered services before your insurance begins to pay.
- Coinsurance is not a copay. A copay is a fixed amount you agree to pay for certain healthcare services.
- Generally, the higher the coinsurance, the lower your monthly premiums will be (and vice versa).
How Does Coinsurance Work?
You’re responsible for coinsurance payments once you’ve paid enough to meet your deductible. After you’ve paid out of pocket up to your deductible, you and your insurer start to share costs — your insurer will pay a percentage of some healthcare costs, and you will pay the rest. Unfortunately, coinsurance is often required for high-cost services, such as treating a broken limb or receiving hospital care. A typical cost-sharing split is 80/20, where your plan covers 80% of healthcare costs, and you’re responsible for the remaining 20%.
How Does Coinsurance Work with Other Cost Components?
Since there are other monetary moving parts to health insurance, it’s easy to get confused. Here’s how coinsurance works with other cost-sharing components4:
Premiums: The premium is the monthly payment you make to your insurer to remain enrolled in your plan. Whatever you pay in premiums doesn’t count toward your deductible or your ultimate out-of-pocket maximum.
Deductible: The deductible is the amount of money you must pay before your insurer starts paying a portion of your costs. For instance, if your deductible is $2,500, you’ll have to pay $2,500 out of pocket before your insurance will start covering any portion of your bills.
Copayments: Copayments are fixed fees you might be required to pay for certain services. For instance, your plan may require a $25 copay every time you see your primary doctor and a $10 copay for every generic prescription you buy.
Out-of-pocket maximum5: This sum is the most you would have to pay for covered healthcare services within a health insurance plan year. Once you’ve hit this number, including deductibles, copayments and coinsurance, your insurance covers 100% of your healthcare costs for the rest of the year.
|Health insurance component||How it works|
|Premium||Monthly payment for coverage|
|Deductible||What you pay before your insurance kicks in|
|Copayment||A fixed fee you might pay for certain services|
|Coinsurance||A fixed percentage of healthcare costs that you agree to pay|
|Out-of-pocket maximum||The most you’ll pay for covered healthcare services in a plan year|
How Do You Calculate Coinsurance Costs?
Calculating your coinsurance costs takes a few quick steps:
Know your coinsurance rate. Check your insurance plan details to understand your coinsurance share of each bill, and note if coinsurance varies from one service to another.
Find your cost of care. If you’re seeing a provider in your plan’s network, this will be the discounted rate that your insurer and healthcare provider have agreed upon. You can find this amount on your Explanation of Benefits (EOB) as an “allowed amount.”
Convert the percentage of costs into a decimal point. For instance, 20% coinsurance is the same as 0.20.
Multiply your coinsurance rate by the total allowed costs. If allowed costs are $1,000 and your coinsurance is 20%, multiply 1,000 by 0.20 to get $200.
Remember that coinsurance only applies after you’ve paid your deductible. Before you hit your deductible, you’ll be responsible for 100% of the allowed costs.
An Example of Coinsurance
Imagine you have a plan with the following parameters:
- Deductible: $2,000
- Coinsurance: 20%
- Out-of-pocket maximum: $8,500
Here’s what would happen if you had a medical procedure that cost $5,000:
- You pay the first $2,000 (your deductible)
- You pay 20% of the balance of $3,000, which is $600
- Your total out-of-pocket costs would be $2,600
Once your total out-of-pocket spending reaches $8,500, your insurance plan will cover 100% of your remaining costs for the rest of your plan year.
When Is Coinsurance Common?
Coinsurance is a common part of many health insurance plans. Even if the plan has copayments for certain services, there may be coinsurance that applies once you hit your deductible.
If you’re purchasing an Obamacare health insurance plan from the Affordable Care Act Marketplace, the coinsurance varies by plan level. There are four plan levels: Bronze, Silver, Gold and Platinum6:
- Bronze: 40% coinsurance (insurance company pays 60%)
- Silver: 30% coinsurance (insurance company pays 70%)
- Gold: 20% coinsurance (insurance company pays 80%)
- Platinum: 10% coinsurance (insurance company pays 90%)
Coinsurance allows you to split healthcare costs with your insurer according to a predetermined formula. To understand how much coinsurance might cost you in a Marketplace plan, you can use Healthcare.gov’s tools to select each family member’s expected medical use — either low, medium, or high. Then as you view plans, the site will show you an estimate of your costs based on your expected healthcare use.
These sums are an estimate, but they can help you compare plans. If you have questions about how the coinsurance works in different healthcare plans, call the your insurers. In any case, it’s helpful to understand how you or your family use healthcare as you shop and compare before signing up.