What is Coinsurance for Health Insurance?

If you find yourself purchasing medical insurance for the first time, you need to know a lot about how a medical plan functions.  One of the things that is most important to understand is how coinsurance for health insurance works.

Fundamentals of Insurance

To understand how coinsurance for health insurance works in a medical plan, it is imperative to understand a basic principle of insurance: instead of an individual risking the chance of financial loss due to an unforeseen event, that person can pay a price (called a premium) to an insurance company, and that company will take on the risk of the financial loss.  The greater the risk of loss, the greater the premium.

A way to lower the premium is to take on some risk of the loss for yourself.  One way to accomplish this is to implement coinsurance.

So What is Coinsurance for Health Insurance?

Coinsurance is when a health insurance policyholder pays a percentage of the covered medical claims.  The coinsurance is usually expressed as the percentage that the insurance plan pays, so if you see a plan has 80% coinsurance, that means that you will pay 20% of the claim amount, and the insurance company will pick up the remaining 80%.

There are other factors involved, such as a deductible and out of pocket maximum, but for now, just understand that for medical claims subject to coinsurance, you and the insurance plan split the cost of the claim.

Is Everything Subject to Coinsurance?

It depends on the plan that you have.  A typical major medical plan utilizes copays for things like office visits to primary care doctors, specialists, and the emergency room.  If you pay a copay for these visits, you usually will not be required to pay coinsurance on top of the copays, although some plans do actually require a copay plus a coinsurance for emergency room visits.

Most medical plans also have a limit on the total amount of out of pocket expenses one person is required to pay in a year.  If you reach this limit, then no further coinsurance is required.

How Can I Know What is Subject to Coinsurance for Health Insurance Plans?

Make sure to carefully read the benefit summary of any medical plan you are thinking about enrolling in.  The Patient Protection and Affordable Care Act (PPACA), more commonly referred to as Obamacare, requires insurance companies and group plans to provide a Summary of Benefits and Coverage (SBC) for medical insurance plans.

SBCs are designed to succinctly display the benefits that a medical plan provides.  The language is easy to read, and an SBC makes it easier to compare benefits between multiple plans on an apples-to-apples basis.

How Can I Know What Level of Coinsurance is Best for Me?

That really depends on the amount of risk you are willing to take.  A plan that requires less coinsurance from you will require more money paid in premium.  For lower premiums, choose a plan that asks you to pay more coinsurance.  If you do not want to take the chance of paying more out of pocket if you need medical services, then you’ll want a less coinsurance for you.  Just know that you’ll be paying more in premium.

But if you want more money for the rest of your daily expenses, coinsurance for health insurance is a great way to lower your monthly medical insurance premium.

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