What is coinsurance?

shutterstock-2301368355.jpg

If you have a health plan, you’ve probably heard the term “coinsurance” at one point or another. In this article, you’ll learn what coinsurance is, how it works and see a few examples of how it fits with the rest of your costs.

How does coinsurance work

Coinsurance is a fixed percentage you are responsible for paying when you receive a covered health service. You typically only pay coinsurance after you have met your health plan’s deductible for the year.

Here’s how paying your bill works when you have a health insurance plan with coinsurance:

1. First, you’ll need to meet your deductible. A deductible is a set amount of money you pay before your health plan starts to pay for medical costs. Some health plans require you to meet your deductible before they start paying for covered health services. This amount resets at the beginning of each year.
2. Then, coinsurance applies. After you meet your deductible, you pay coinsurance— a fixed percentage of the remaining costs of the covered health service.
3. Your health plan pays the remaining balance. Once you reach your deductible and pay the coinsurance for a covered service, your health plan covers the rest of the cost.

The money you pay for your deductible, copays and coinsurance all contribute towards your out-of-pocket maximum. Here’s how paying a health provider bill works once you’ve reached your health plan’s out-of-pocket maximum:

1. Reach your out-of-pocket maximum. Remember, your deductible, copays and coinsurance payments count towards your out-of-pocket maximum.
2. All in-network covered services are paid in full. If you meet your out-of-pocket maximum, your health plan generally pays for 100 percent of in-network covered services for the remainder of the plan year.

Coinsurance vs. copay

Some health plans have both copays and coinsurance, and they are commonly confused. Let’s take a look at what makes them different.

A copay:

• Is a set amount. A copay is a set amount you pay for a specific covered service, such as $25 for a primary care provider (PCP) visit.
• Is often paid at the time of service. Copays are frequently due at the time you receive the service. If you don’t pay your copay at the time of service, your provider will send a bill.
• May not count toward the deductible. Copays don’t typically count toward your plan’s deductible, but they often count toward your out-of-pocket maximum.

On the other hand, coinsurance:

• Is a percentage. Your coinsurance rate is the percentage you pay for covered services until you meet your health plan’s out-of-pocket maximum. Coinsurance percentages and when they apply vary by plan.
• Is often applied after the deductible is met. With coinsurance, you typically pay for 100 percent of your health care services until your deductible is met. Then you begin paying coinsurance while your health plan pays its share of covered costs. Like a copay, coinsurance counts toward the out-of-pocket maximum.

An example of coinsurance in action

When you understand how coinsurance works, it’s easier to estimate what your out-of-pocket costs will be before you receive a covered health service. Let’s look at an example. Remember, exact copay, coinsurance and deductible amounts vary by plan.

So, let’s say you need a service that costs $1,000, and you’ve already met your health plan’s deductible. Your plan includes coinsurance of 20 percent. After receiving this procedure, your insurance company sent you an Explanation of Benefits (EOB) which outlined how your plan's benefits were applied. The EOB shows that your insurance company would then cover the remaining cost of $800.

Learn more about health insurance

Coinsurance is just one of many terms you’ll want to understand to have a good grasp on the health insurance basics. If you’re looking to learn more about health insurance, such as commonly used terms and how to make the most of your benefits, Wellmark can help. Read this article to learn how health insurance works and get connected to more health insurance resources.

The Plan Smart section of Blue also offers several tips for making the most of your benefits, like using your preventive care benefits, how to talk to your doctor and even surprising benefits your health plan may offer.