Health insurance is a complicated product. It can involve several types of out-of-pocket expenses for the consumer. Some of these out-of-pocket expenses include premium payments, deductibles, co-pays and coinsurance.
Coinsurance is the out-of-pocket amount you are required to pay in addition to your deductible. This amount is listed as a percentage of the total amount and has a maximum out-of-pocket cap. A common coinsurance offering is 80/20. This means for every dollar an insurance company will pay out after your deductible you will be required to pay 20 cents. If you have a $500 deductible and your incur $3,000 in medical expenses you would pay $500 (deductible) plus $500 (20 percent of $2,500) and your insurance company would pay $2,000 (80 percent of $2,500.)
It’s important to note that a health insurance plan that includes coinsurance also includes a stop-loss on the total out-of-pocket amount you may be required to spend. All insurance companies set these limits to different amounts but it isn’t uncommon for this amount to be between $2,000 and $3,000.
Example: You have a $500 deductible and you have to have to have a surgical procedure that costs $15,000 dollars. Without a stop-loss it would breakdown like this: $500 (deductible) plus $2,900 (20 percent of $14,500) equals $3,400 out of pocket. Having a $2,000 stop-loss would save you $1,400, while a $3,000 one saves you $400.
Coinsurance is not a requirement for having health insurance. Some individuals choose to carry higher deductibles in order to lower monthly premium costs. Choosing a high deductible plan may mean paying out $1,500 or $2,000 or a higher amount depending on your specific plan, but once the deductible has been met then the insurance company will pay out 100 percent for any amount over that.
It’s important to look at your entire income and health status when choosing health insurance coverage. Does it make more sense for you to have a $500 deductible with 80/20 coinsurance and a $300 per month premium or a $5,000 deductible with no coinsurance and a $30 per month premium? It all depends, are you in and out of the hospital and doctor’s office often or do you have small children who might become ill? What if you rarely visit the doctor and you’ve never been hospitalized? A licensed insurance agent or your benefits representative at your workplace can help you decide what is best for you.
Coinsurace vs Copay
Coinsurance is not the same as co-pay. Co-pay is a fix cost amount that you pay whenever you see your doctor. If you have a $20 co-pay, you will pay only $20 per doctor visit regardless of what your doctor charges. Your insurance provider pays the difference. An insurance plan without a co-pay and with co-insurance may save you some costs on your monthly premium, but be aware that you will be responsible for any medical care until your meet your deductible.
- defibrillator and hospital room quipment monitor image by alma_sacra from Fotolia.com