Health Insurance Articles

What's The Difference Between Coinsurance And Co-payment

2009-12-15

The terms of an insurance policy can often confuse a policyholder. Although your insurance agent will help you navigate the legalese regarding the policy agreement, you might still find some things that require more explanation. Two of the terms that often cause confusion among policyholders are coinsurance and co-payment - terms that many mistakenly use interchangeably. The confusion can also lead to false expectations (and a few unpleasant surprises), especially when it comes to paying a substantial medical bill. Learn to understand the difference between coinsurance and co-payment and find out how they will affect your policy and its corresponding benefits.

Coinsurance refers to the percentage amount of the cost of approved medical expenses that you are required to share with the insurance company. For example, if the terms of the policy indicate an 80/20 sharing, the insurance company will cover 80 percent of the bill while the policyholder will shoulder 20 percent. This ratio will be paid for once the deductibles have been applied to the bill. Your share is referred to as the 'coinsurance'. This will vary depending on the total cost of medical services you incur. The coinsurance is a fixed percentage and is a type of sharing that most health insurance policies use.

Co-payment is the other type of cost sharing where you pay a flat amount for specific services, such as consultation or prescription drugs. This amount is already predetermined by your insurance company and will not change, regardless of the cost of the medical service. To illustrate, your insurance company may offer a policy where a visit to the doctor's office will cost you $15. You will have to pay this amount each time you visit a medical provider, regardless of the type of professional service you receive. The minimal amount is meant to ensure that you get the medical care you need and do not have to worry about not being able to afford the cost.

A major difference between a coinsurance and a co-payment is how they are applied to deductibles. A deductible is the amount you pay for services you have obtained before insurance benefits are payable. Once this amount is settled, you will have to take care of either the coinsurance or co-payment amount. To help you avoid having to pay for a huge hospital bill, insurance companies will place a cap on the amount you will have to pay for annually. The cap is the maximum amount your policy will require you to shoulder. This amount is indicated in your policy and will give you an idea about how much the maximum out-of-pocket expense you will have to pay for within a year of coverage.