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What is coinsurance?

people asking about coinsurance health insuranceCoinsurance is an insurance policy that splits the cost of your health care bills between you and the insurance company, in essence a cost-sharing arrangement. The rate you pay in premiums for your health insurance will determine the amount that the company pays, and portion in which you are responsible.

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How does coinsurance work?

Most coinsurance plans have percentage rates, 80/20 is common, where they pay 80% of covered expenses, and you pay the remaining 20%. Under a plan like this, for example, a one hundred dollar charge by the provider would require you to pay twenty dollars. These percentages vary depending on the amount you pay in premiums, the more you pay, the lower the coinsurance rate to you is. Typically, the percentage you pay is never greater than 50%.

What are the benefits of coinsurance?

The primary benefit is the lower cost to the insurance purchaser. Since the costs are shared, the provider can charge less. In addition, it brings a measure of certainty in that shared costs are defined and set. Many people and businesses have switched to coinsurance from other plans because of these benefits.

A protective cap on out-of-pocket expenses is another common feature of a coinsurance policy, which can protect you in the event of a major medical problem. A cap will set the maximum amount you will have to pay and have the insurance provider pick up 100% of all expenses beyond that amount.

What are the limitations of coinsurance?

If you are a member of a health maintenance organization (HMO), a point-of-service plan (POS), or a preferred provider organization (PPO), you may have limitations placed on your coinsurance policy such as a requirement that you stay in a particular network of health care providers.

You may also be required to get any referrals to specialists recommended by your primary care physician and approved by the insurance company. If you decide to get services outside your plan, you may face higher fees and a different coinsurance rate.

Additionally, many coinsurance plans pay only those charges they declare to be “reasonable and customary.” A doctor charging significantly more than other doctors in your area for a given service may put you at risk for higher out-of-pocket expenses. The insurance company will pay only the agreed upon percentage of the reasonable and customary fee, you would pay the balance.

To avoid these additional costs, you can ask your doctor what he is going to charge you beforehand and compare that with other doctor’s fees for the same services in your area. You should also check with your insurance company once you have this information to see what they pay for the particular service.

Another option is to negotiate with the insurance provider if their payment guidelines don’t match prevailing rates in your area. Always read the benefits summary of your policy carefully and ask for explanations of things you don’t understand.

Is coinsurance the same as co-pay?

No. The portion of your health care expenses that are not covered by your insurance provider that you are responsible for paying is called the copay amount. These can include a set fee per doctor’s office visit, or require you to pay part of prescription drug costs for example. Copays may be a part of a coinsurance plan, but they are not the same thing.

Is coinsurance the same as a deductible?

Again, no it is not, however deductibles may be a feature of a coinsurance plan. A deductible is a set amount you must pay first before you can begin receiving any benefits from the insurance company. It is usually an amount of money paid by you per year. Once this amount is paid, the coinsurance policy will kick in.

Check your plan carefully and take note that some services, like emergency room visits, are not subject to a deductible charge.

It is always a good idea when you are searching for insurance to look up the companies you are considering through reputable agencies such as A.M. Best or the Better Business Bureau. A.M. Best rates the financial fitness of insurance companies. The Better Business Bureaus monitors any complaints by consumers and how the company resolves them.

To find health insurance quotes online, simply type your zip code into the free box on this page to compare rates now!