What is Coinsurance & How Do Medical Claims Work? | eHealth

November 8, 2022

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What is Coinsurance?

Coinsurance refers to the portion of a medical claim that you are responsible for paying, in addition to any copays or deductibles outlined in your health plan. In 2021, around 68% of covered workers had coinsurance.

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Health insurance plans typically include cost-sharing features, which means you are responsible for a portion of your medical expenses while the health insurer covers their share. Coinsurance is one such way to share costs, alongside deductibles and copays.

Reading: What does coinsurance mean for medical insurance

Deductibles are the amount you must pay for most covered medical services before your health plan contributes.
Copays are a fixed dollar amount you pay for each covered medical service.
Coinsurance represents the percentage of the medical expense that you and the insurer share, based on your plan.

In a coinsurance agreement, the percentage paid by the insurer is usually higher than your share. For example, if a health plan offers 80%/20% coinsurance, the insurer covers 80% of the allowed medical expense, leaving you responsible for 20%. The same principle applies to different coinsurance ratios. For instance, a plan with 50%/50% coinsurance means you and the insurer each pay half of the allowed medical expense. Obviously, this results in higher out-of-pocket costs compared to a plan that covers 80% of medical expenses.

Consider this scenario: if your health insurance plan has an 80%/20% coinsurance requirement (with no additional copay or deductible), a $100 medical claim would cost you $20, while the insurer would pay the remaining $80.

How Coinsurance and Other Cost-Sharing Work

Coinsurance is just one form of cost-sharing for medical services covered by your health insurance. Many plans include deductibles, copays, and coinsurance together. For example, your health insurance might have a $1,000 annual deductible, 80%/20% coinsurance for all covered services, and a $6,000 maximum out-of-pocket limit for yearly healthcare expenses.

Let’s illustrate how coinsurance and other cost-sharing features work, assuming you’re admitted to the hospital for the first time in a year, incurring $50,000 in medical expenses:

You pay the $1,000 deductible, leaving you with $5,000 of financial responsibility for covered medical expenses until you reach the plan’s $6,000 maximum out-of-pocket cap.
With 20% coinsurance, you pay $1,000 for every $4,000 the insurer pays. Therefore, for the next $25,000 in covered medical expenses, you pay $5,000 while the insurer pays $20,000.
Once you’ve paid the $1,000 deductible and $5,000 in coinsurance, you’ve reached your $6,000 out-of-pocket maximum for the year. In total, you pay $6,000 for this medical bill, and the insurer covers $44,000. You likely won’t have to pay coinsurance for covered services for the rest of the year.

Since cost-sharing varies across different health insurance plans, it’s vital to understand the details of your specific plan to anticipate your healthcare costs.

Coinsurance and Prescription Drugs

Coinsurance also applies to prescription drugs. For instance, if your health insurance has an 80%/20% coinsurance split, you’re responsible for 20% of the total cost of your prescriptions. This means that if you pay $100 for your medicine at the pharmacy, the insurance company covers $80, and you pay the remaining $20. Review your health insurance policy carefully to understand when and how much you need to pay for prescription drugs.

When Do You Pay Coinsurance?

Generally, your coinsurance kicks in after you’ve paid your deductible. For example, if your deductible is $1,500, you’ll start paying coinsurance once you’ve spent that much on medical costs. Different deductibles and copays may apply to outpatient visits, hospital stays, and other types of care. Make sure you understand the details of each component of your health insurance, and don’t hesitate to contact a professional if you have any questions.

Do you have Medicare? Read our article that answers, “What’s the difference between Medicare coinsurance and copays?”

Does Coinsurance Count Toward Your Out-of-Pocket Maximum?

You may be wondering, “How does my out-of-pocket maximum work?” This refers to the maximum amount of money you have to pay out of pocket. Coinsurance counts toward your out-of-pocket maximum. Once you reach that limit, you shouldn’t have to pay any more coinsurance. Your health insurance company should be responsible for all remaining costs. For more information about coinsurance and your out-of-pocket maximum, contact a professional affiliated with your insurance plan.

If you use eHealth to find health insurance, our licensed insurance agents are available to help you before, during, and after to ensure you understand your policy.

How Can You Determine Your Coinsurance Costs?

There are several ways to find out what your coinsurance costs will be. Start by checking your insurance plan documentation to see what percentage of your medical bill you’re responsible for. This number will help calculate your individual medical costs.

For example, if your policy states that your coinsurance is 20%, you’ll be responsible for 20% of the bill. Remember, coinsurance only applies after you’ve met your deductible. You’ll continue to pay coinsurance until you reach your out-of-pocket maximum, after which you shouldn’t be responsible for any additional medical expenses.

In 2021, the average coinsurance rates for covered workers were 19% for primary care and 20% for specialty care. If you find it difficult to locate this information in your health plan, contact a professional who can provide clarification.

Coinsurance Based on Plan Levels

ACA-compliant health insurance plans are generally categorized into metal tiers that determine how much your provider covers versus what you’re expected to pay. Here’s an overview:

A bronze plan covers approximately 60% of your health expenses.
A silver plan covers around 70% of your plan expenses.
A gold plan is responsible for approximately 80% of your health expenses.
A platinum plan covers about 90% of your medical expenses.

If you have questions about how health insurance and coinsurance levels work, we can help you find the right coverage to meet your needs. Our team is always ready to assist and ensure you have the appropriate health insurance. Contact us today.

Pros and Cons of High and Low Coinsurance Plans

Pros of High Coinsurance Plans

Low monthly premiums: Most high coinsurance plans come with lower monthly premiums. If you anticipate only needing preventive care, which is often covered 100% when you stay in-network, choosing a high coinsurance plan can help you save money.

Disadvantages of High Coinsurance Plans

Costly out-of-pocket medical expenses: Opting for a health plan with high coinsurance means you’ll pay more out of pocket for covered health care services compared to a low coinsurance plan. High coinsurance plans often have high deductibles, so you may end up paying 100% of healthcare expenses until you meet your deductible. Additionally, if you frequently visit primary care physicians, specialists, or require hospitalization for a chronic condition or unexpected illness or injury, you could face substantial expenses. With high coinsurance plans, it’s more challenging to predict and budget your healthcare expenses since your cost share is higher.

Before deciding on a health plan with high or low coinsurance, consider your personal health needs and financial circumstances.

Where to Find Affordable Health Insurance

At eHealth, we understand your desire for affordable health insurance that suits your coverage needs. We’re here to help you find the right plan. Explore your individual and family health insurance options, compare plans, premiums, cost-sharing, benefits, and out-of-pocket maximum limits with eHealth. Our team of licensed insurance brokers is ready to assist you in understanding your options.