Health insurance is confusing. The terms used in the insurance industry don't make it easier for us to understand what our health insurance company is going to pay as opposed to what we are supposed to pay. As you learn the differences between terms such as "co-pay," "coinsurance," "deductible" and "usual, customary and reasonable," write down what you learn so you can keep it straight. This article will help you understand what "coinsurance" means on health insurance.
"Coinsurance" is a co-sharing agreement between the insurance company and you, the customer. This means that you (the insured) will cover a set portion of the covered costs after the deductible has been paid. For instance, under an 80/20 plan, the customer pays 20 percent of the covered charges and the insurance company pays 80 percent. This is not a co-pay. In addition, you pay the excess charges over your coinsurance amount. See link in Resources.
Most (not all) health insurance companies set a cap on what you, the customer, have to pay toward your medical in one year. This includes both the deductible (the amount you must spend on your health care in one year) and the coinsurance. Once you've paid up to your deductible, the insurance company begins to pay its part of the coinsurance, usually 80 percent while you pay your 20 percent. When you reach that cap, the insurance company begins to pay 100 percent of your medical bills. If you receive medical services which are not covered in your insurance plan, you pay 100 percent of those. Your monthly premium payment is not included in the annual cap.
Health insurance customers often think they won't have to pay for anything once the annual cap is reached, but that is not the case. The insurance company has established payments that it calls "usual, customary and reasonable" (UCR). In general, these are lower than the fees your doctor charges. You have to pay the excess charges even though you have met your deductible and your annual cap. If this is happening to you, your insurance company is within its rights. Read the following section to find out more about UCR developments.
Health insurance, whether purchased through your employer or privately, is meant to relieve some of the financial burden of your high medical costs. As currently structured, insurance companies have established practices which do cover what is in the contract. More costs are passed on to you in your coinsurance. Some insurance companies have been using other companies which determine the "usual, customary and reasonable" (UCR). A few insurance companies have ownership in the companies that determine those UCR fees. So, even though you have been paying your premiums, deductibles, coinsurance and/or co-pays, you may have been paying too much.
Health insurance is designed to cover our medical expenses for preventive care, for illnesses, accidents, hospitalization and surgery. While insurance companies are in business to help their customers, they are also mindful of the bottom line--which is to show a profit at year end. With this in mind, some insurance companies that offer private plans have several plan levels. Some of these cost less and provide less coverage. Others will cost you more, but they will provide a much higher level of coverage. It is to the benefit of your insurance company to pay the lowest amount possible while covering your health care needs. Insurance companies will take on the costs of your health care--and pass the remainder on to you through your deductible, co-pay and coinsurance.
- Jupiterimages/Comstock/Getty Images