Health Insurance Articles

What Is Co-insurance?

2009-10-15

Coinsurance, or percentage participation, requires that the insured share the cost of medical care. With a coinsurance provision of 80/20, the medical plan pays 80% of medical charges after your deductible is paid; you're responsible for $20 for everyone $100 charge for any medical expense. Once the 80 percent is paid, you're responsible for the rest of the 20 percent. Sometimes a coinsurance of 70/30 or 90/10 is used, but 80/20 is often the best option. In other words, it's a certain percentage of your medical bill that you're required to pay once the insurance pays their portion.

You might experience financial hardship if something major happens due to the coinsurance clause. To help with the burden, major medical expenses plans have a "coinsurance cap" or "stop-loss limit". This will limit the money that comes out of your pocket if a major medical expense is needed. The coinsurance cap ranges from $2,000 to $3,000 depending on your plan. In some cases your limit can be as low as $1,000. Once your coinsurance cap is reached, all eligible expenses left over will be paid in full, "up to the plan's overall limit of coverage," according to Free Advice. For example, if you have a 20% coinsurance on your health insurance policy and you had recent heart surgery. You receive your bill in the mail and it's in the amount of $2,000. You're now responsible for having to pay your deductible ($200), plus the 20% of the remaining amount on your medical bill ($360). In total $560 will be coming out of your pocket.

The main disadvantage of having a coinsurance is the out of pocket expense you're required to pay. We're in tough times right now and it's hard for people to put money aside for a "what if" situation. Not only are you paying your deductible, which can range from $250 - $5,000, but you're also required to pay the remaining 20% of the medical bill. Depending on your insurance policy, you could lower your coinsurance liability, but that means you'll be paying a much higher premium, which shouldn't be too surprising to anyone. It's best to sit down and discuss with those involved which option is best for you.

If used correctly, there are some great advantages to having a coinsurance in your health insurance plan. If you have money put away in case of an emergency, having a coinsurance can save you money on your insurance premiums. Before making any final decisions with your health insurance, make sure you know how much the insurance will pay if a claim is made to avoid being surprised by any unexpected medical expenses.