Understanding coinsurance
Learning about coinsurance is an important aspect of understanding health insurance costs and choosing that works for you. We’ll cover what coinsurance is, how coinsurance works, compare coinsurance vs. copays and look at an example of how coinsurance works.
What is coinsurance?
Coinsurance is a percentage of the cost of a covered service. Until you reach your deductible, you’ll pay for 100% of out-of-pocket costs. After you meet your deductible, you and your insurance company each pay a share of the costs that add up to 100 percent. Typical coinsurance ranges from 20% to 40% for the member, with your health plan paying the rest. But cost-sharing percentages will vary depending on your plan.
How does coinsurance work?
If your doctor visit costs $100 and you’ve met your deductible, your coinsurance payment of 20% would be $20 out of pocket. Your insurance would then pay the rest of the allowed amount ($80). Keep in mind, your coinsurance benefit doesn’t apply until after you’ve reached your deductible. Until then, you’ll need to pay 100% of the cost.
What’s the difference between coinsurance vs. copays?
Copays are different from coinsurance, and the type of payment you have will depend on your health plan. Coinsurance is a percentage of the cost of service while a copay is a fixed rate. This chart helps break down how these two types of payments work and how they’re different.
| Copay | Coinsurance | |
|---|---|---|
| What is the amount paid? | Flat dollar amount | Percentage of the cost, if you've met your deductible |
| When is it paid? | Typically paid at the time of service | Billed by the provider who you will pay directly |
| Does it count toward your deductible? | No, not in most plans | |
| Does it count toward your out-of-pocket max? | Yes | Yes |
Example of how coinsurance works
Jake’s health plan has 80/20 coinsurance. This means after Jake has met his deductible, his plan will pay 80% of covered costs while Jake pays 20%.
For example, Jake has already met his $1000 deductible for the year. He schedules a visit to see his primary doctor, which is $100 for the visit. This means his health plan will pay $80 for the visit and Jake will pay the remaining $20.
Managing costs with coinsurance
Knowing how coinsurance works can help you add up your potential costs more accurately when you're planning for the year or when you're choosing your health plan during open enrollment.
Comparing your potential medical costs to different types of plans might be helpful in making sure you are covered for different scenarios. Some plans, like fixed benefit health insurance, can help you manage potential out-of-pocket costs from your main health insurance plan.