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What Is Coinsurance? How This Hidden Healthcare Cost Works

If you’re wondering what coinsurance is, you’re not alone. Coinsurance is one of the tricky out-of-pocket costs overlooked by too many people that can end up costing you a fortune. Here’s how to avoid overpaying.

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There’s a reason so many people turn to health insurance agents and brokers when they’re shopping for the perfect plan, it’s because understanding the what you’re signing up for is nearly impossible. Health insurance jargon is complex, to say the least, and that’s what so many ends up paying for hidden costs that aren’t so hidden. If you’re looking through your policy and see a term you don’t recognize, we’re here to help. So, the next time you find yourself asking, “what is coinsurance?” Here’s what you need to know.

What Is Coinsurance?

Coinsurance is a form of cost-sharing between you and your health insurance provider. It typically refers to the percentage you’re obligated to pay towards a claim, while your insurer picks up the remaining percentage. If it’s still a bit confusing, keep reading for some real-world examples that will help explain it a bit better.

When Does Coinsurance Go into Effect?

Your health insurance company doesn’t start splitting any claims with you until you meet your deductible, and the same is true for coinsurance. Coinsurance goes into effect only after your annual deductible has been met, and even then, you’ll still have to pay a portion of all your claims until your out-of-pocket maximum is met.

How Coinsurance Works

Coinsurance works as you might expect, but let’s break it down a bit further. For this example, let’s assume that your annual deductible has been met, and your out-of-pocket maximum has not been met. This will set up an easy to follow the scenario that outlines exactly what you can expect your coinsurance costs to be.

In this scenario, you go to the doctor for a routine checkup, and thankfully they find nothing wrong with you. Since you went to a doctor in your network, the cost is pretty standard, and you get a bill for $100. Now remember, your deductible has already been met, so right now your Explanation of Benefits (EOB) looks something like this:

  • Physician Visit: $100
  • Coinsurance: 80/20
  • Owed Amount: $20

Here’s how we arrived at your $20 owed amount. Your coinsurance will usually be split into 2 different percentage totals. The first number is usually what your health insurance company will pay towards the claim, and second is what you will pay towards the claim. In the above scenario, you have a plan that splits coinsurance costs 80/20, meaning your insurer pays 80% while you pay 20%.

Since the total claim amounted to $100, your insurer paid $80 towards the bill. That accounts for the 80% they are obligated to pay per your policy. You’re on the hook for the remaining $20, since that amounts to the 20% you’ve agreed to pay per your policy. It’s important to understand your coinsurance rates because as you can see, any other plan could end up costing you significantly more.

Understanding Coinsurance Rates

Your coinsurance rates can vary, meaning that depending on your plan you may end up paying anywhere from 0% to 100% of your claim. While the most common coinsurance rate is 80/20, sometimes shortened to 20% coinsurance, other rates can include:

  • 0/100 coinsurance (100% coinsurance) - You pay 100% of the claim
  • 10/90 coinsurance (90% coinsurance) - You pay 90% of the claim
  • 20/80 coinsurance (80% coinsurance) - You pay 80% of the claim
  • 30/70 coinsurance (70% coinsurance) - You pay 70% of the claim
  • 40/60 coinsurance (60% coinsurance) - You pay 60% of the claim
  • 50/50 coinsurance (50% coinsurance) - You pay 50% of the claim
  • 60/40 coinsurance (40% coinsurance) - You pay 40% of the claim
  • 70/30 coinsurance (30% coinsurance) - You pay 30% of the claim
  • 80/20 coinsurance (20% coinsurance) - You pay 20% of the claim
  • 90/10 coinsurance (10% coinsurance) - You pay 10% of the claim
  • 100/0 coinsurance (0% coinsurance) - You pay 0% of the claim

Your Coinsurance Maximum

You can breathe a bit easier knowing that there is a coinsurance maximum that will save you from paying out-of-pocket for every claim you make. Most often, you coinsurance maximum will be included in your out-of-pocket maximum, the annual limit to how much you’ll have to pay towards your medical bills. Once you hit your coinsurance maximum, regardless of your plan, your insurance company will pay 100% of claims.

Lowering Your Coinsurance Rates

If you hate having extra costs looming over your head, there are two ways to lower your coinsurance rates. The first is a bit obvious now that you know what to look for, but effective. All you have to do is find a plan that comes with a lower coinsurance rate. You will probably end up paying a bit more upfront in monthly premiums, but you may end up saving money in the long run.

The second option requires you to purchase health insurance through the marketplace. With Cost Sharing Reductions (CSR), you could be eligible for subsidies based on your income. If you purchase a Silver Plan through the health insurance exchange and earn between 100% to 250% of the federal poverty line, you may qualify. So, make sure to explore all your options.

FirstQuote Health can also help you find a plan with coinsurance rates that fit your needs. If you want to easily compare health insurance rates in your area, all you have to do is type in your zip code to see what quotes are available. By getting started now, you can get covered as early as today.

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