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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What is a Network Discount in a Health Insurance Plan?

There are a lot of confusing aspects about a health insurance plan, specifically a medical plan.  Something that causes much head scratching is the concept of a network discount.  Just what is a network discount, now is it applied, and how is it beneficial?  First, though, one must understand what a network is.

By having a health care service performed at a network provider, the network discount keeps an individual’s health care costs down.

What is A Medical Insurance Network?

Insurance arrangements such as a preferred-provider organization (PPO) and point of service (POS) plan allow plan participants to visit any doctor or facility (providers) that they would like.  However, in an effort to keep the cost of health care down, insurance companies create a network of providers that accept a set amount for each covered service.  Insurance plan policyholders in turn are able to pay less for medical services by using a provider in the network.  The network providers bring in less revenue than they otherwise would, but they are able to attract more patients since the patients get better benefits.

What is the Network Discount?

The network discount, then, is the difference between what a provider bills for a medical service and what the provider is contracted to receive through the patient’s insurance plan.  For example, if your family doctor charges $100 for an office visit, and the contracted rate through the insurance network is $60, then the network discount would be 40% (($100 – $60)/$100).

How are Discounts Determined?

Network discounts are negotiated between each provider and insurance company.  If a provider isn’t happy with the potential arrangement, he/she/it is free to stay out of the network.  However, that could possibly mean less business.

It is not always a percent discount that is negotiated.  The rates that can be charged by a network provider can be based on a fixed fee for medical services, a percent discount off of billed charges, or in the case of an inpatient hospital facility, a per day amount.

However, the negotiated rate is developed, a discount percentage can still be calculated by figuring the amount saved through the network divided by the billed charge amount.

Is a Network Discount Beneficial?

The easy answer for a medical insurance policyholder is a resounding yes.  By having a health care service performed at a network provider, the network discount keeps an individual’s health care costs down.  And if the patient still wants to go out of network, he or she is free to do so, just with a higher out of pocket cost.

For the provider, the network discount is a double-edged sword.  The discount means that the physician and/or facility will bring in less revenue than they would with a non-network patient.  However, the trade-off is that the provider will be on the in-network provider list and will attract more patients.

In any event, the network discount will mean medical services will be available at a lower cost both to the health insurance plan member and the insurance plan itself.  This equates to more money in the pocket of the patient and lower medical insurance premiums (which itself will result in more money in the pocket of the patient).

Is Your Insurance Company’s Network Working For You?

The last thing any of us want to do is find out we’re paying too much for a bad health insurance network. Does that sound like you?

Fortunately, we have access to hundreds of plans and can narrow your choices down to the ones that make the most sense for you and your family.

All you have to do is visit this link  —->>>> Affordable health insurance with great networks

Once there you can find the best insurance plans at the best prices available.

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