Coinsurance is a cost-sharing measure similar to co-payments and deductibles, as all three functions include certain costs that you pay for medical services covered by your health insurance. Many health insurance plans have all three cost-sharing features.
Co-insurance is the percentage of the value that the insured must insure. If you insure your property for less than this amount, your insurance company imposes a “co-insurance penalty” after filing a claim. The value is determined at the time of loss, and if the sum insured is less than the specified percentage of co-insurance, a penalty is imposed, which reduces the payment of compensation.
How does coinsurance work?
In co-insurance agreements, the interest paid by the insurer is usually higher than your share. For example, if you read that a health plan has 80% / 20% co-insurance, it means that the insurer pays 80% of the eligible medical costs and you pay 20% of the eligible medical costs. The same principle applies if the co-insurance is different. For example, if the plan provides for 50% / 50% co-insurance, the insurer pays half of the allowable medical expenses and you pay the other half. Obviously, in this case, your out-of-pocket expenses are higher than in the scenario where the plan covers 80% of medical expenses.
Consider this scenario. If your health insurance plan requires 80% / 20% co-insurance (and has no additional co-payment or deductible requirements), a $ 100 medical claim will cost you $ 20 and the insurer will pay the remaining $ 80.
How does coinsurance work in a health insurance plan?
Until your deductible is repaid, you will pay the full negotiated rate for certain medical expenses paid. However, once your deductible is repaid, you will pay the co-insurance amount for the service covered. For example, if this paid medical service is $ 1,000 and your co-insurance is 20%, if you have not yet completed your deductible, you will pay the full amount of $ 1,000. However, after completing your deductible, you will only pay the co-insurance amount or $ 200 for the same service.
Each plan should cover several key health benefits, including preventive care, even before your deductible is repaid. Keep in mind that plans with higher monthly installments usually have a smaller deductible and lower co-insurance amounts. This means that if you use more health care during a given year, you will often benefit more from a higher-contributory plan, which will allow you to get a lower deductible faster and then pay less for your treatment with a lower co-insurance rate.
ALSO CHECK: What is insurance deductible and how does it work?
What are the advantages of coinsurance?
- It provides customers with proper coverage. This is probably the most important thing. With insurance, you may not want to invest enough money to cover all your assets, but if you ever need coverage, you will be happy to have adequate protection.
- It protects your resources. If your business has a lot of assets, it has many opportunities to recoup losses that lead to insurance claims. Requiring you to purchase insurance that suits your risk means that the insurance provider is better prepared to deal with real claims situations.
- Encourage accurate assessment and underwriting. When you are required to comply with co-insurance limits, you are likely to make an accurate estimate of the value of your assets, which will benefit the insurer (and you) in the long run.
What is the difference between Coinsurance vs Copay?
Co-insurance is your share of health care costs. You start paying co-insurance after you pay the deductible according to your plan. For instance, you paid $ 1,500 for health care and paid off your deductible. When you go to the doctor, instead of paying all the expenses, you and your plan share the expenses. For example, your plan pays 70 percent. The 30 percent you pay is your co-insurance.
Copay on the other hand is a fixed amount that you pay for medical services, usually upon receipt of the service. The amount may vary depending on the type of service. Your plan determines the amount of Copay for different types of services and when you have it. You can receive a surcharge before you finish paying your deductible. You can also receive a surcharge after paying the deductible and co-insurance debt.
How do you calculate the cost of Coinsurance?
The first thing you need to do when trying to determine your co-insurance payment is find out the co-insurance rate of your plan for the required service. Some plans offer the same rates for all services. But other plans have different co-insurance rates for different services. For example, you may be asked to pay 20% for a visit to your primary care physician, 30% for a visit to a specialist, 40% for a visit to an emergency department, and 15% for medication.
- Find out if your co-insurance rates change depending on whether you see a doctor inside or outside your preferred network. Some plans, such as PPOs, may allow you to see your service provider offline, but may charge higher co-insurance rates.
- Know your co-insurance rate. Check the details of your insurance plan to understand your share of the co-insurance of each account, and see if the co-insurance varies from one service to another.
- Find your cost of care. If you see a provider in the network of your plan, it will be a discount agreed upon by your insurer and health care provider. You can find this amount in your Explanation of Benefits (EOB) as the “allowable amount”.
- Convert the percentage of costs to a decimal point. For example, 20% co-insurance is the same as 0.20.
- Multiply your co-insurance ratio by the total allowable costs. If the allowable cost is $ 1,000 and your co-insurance is 20%, multiply $ 1,000 by 0.20 to get $ 200.
- Remember that co-insurance only applies after the deductible has been paid. Before you receive a deductible, you are responsible for 100% of the eligible costs.