Coinsurance in Health Insurance: How Does It Work, Importance and More

What is Coinsurance in Health Insurance? Explained with Examples

When purchasing health insurance, there are several terms that one must be aware of, such as premiums, deductibles, out-of-pocket maximums, and coinsurance. In this regard, very few customers have a clear idea of coinsurance, which plays a major role in determining the premium amount and the out-of-pocket expenses when filing claims.

Keep reading this blog to learn how coinsurance in health insurance works, its differences with copayment, ways to lower insurance costs and more.

What is coinsurance in health insurance?

Coinsurance in health insurance is the percentage of medical charges you owe after you meet your deductible:

• It’s a cost-sharing agreement between you and your insurance provider for covered healthcare services.
• Once the deductible is met, the remaining healthcare costs are split between the policyholder and the insurance company according to the coinsurance percentage outlined in the insurance policy.
• Most coinsurance applies to all health care services, including hospitalisation, doctor visits, surgeries, and other types of medical expenses.

For example, if your coinsurance is 25%, you are responsible for paying 25% of the total cost of a service, while your insurance covers the remaining 75%. Coinsurance can vary depending on your specific insurance plan, with different rates for in-network and out-of-network providers.

How Does Coinsurance in Health Insurance Work?

Now that you have an overall idea of coinsurance meaning, let’s understand how it works:

1. Paying the Premium: Before you can access any benefits, you must first pay your insurance premiums. These premiums are regular payments in order to keep your health insurance policy active.
2. Meeting the Deductible: Many health insurance plans come with a deductible — the amount you have to pay yourself for most services each year before insurance kicks in to help cover the cost. You pay coinsurance after you reach the deductible amount.
3. Coinsurance: Once you meet the deductible, you and your insurance provider will share the cost of medical expenses. Depending on your coinsurance rate (often 20%, 30%, or 50%), you will continue to pay a certain percentage of the costs. For instance, if your coinsurance rate is 20%, you will pay 20% of the cost, and your insurance company will cover the remaining 80%.
4. Out-of-Pocket Maximum: Coinsurance continues until you reach your out-of-pocket maximum, which is the most you will have to pay for covered services during a policy period (usually a year). When you reach this maximum, the insurance company covers 100% of your medical expenses for the remainder of the benefit period.

Coinsurance vs Copayment: What's the Difference?

Both coinsurance and copayments involve sharing healthcare costs, but they differ significantly in how they work:

Coinsurance & Copayment

Coinsurance is the percentage of the total bill which the policyholder must pay after meeting the deductible.

This is a fixed amount you pay for a medical service, such as ₹200 for a doctor’s visit or ₹1000 for an emergency room visit. It remains constant, regardless of the total cost of the service and the deductible.

Why is it Essential to Understand Coinsurance in Health Insurance?

Understanding what co-insurance is and how it works is an absolute must if you are looking to keep your healthcare expenses under control. Here’s why:

• Coinsurance can add up to a lot of money you are spending on medical services, especially costly ones like surgeries and hospital visits. However, it lowers the premium amount.
• Knowing your coinsurance rate lets you anticipate out-of-pocket costs for different services. It is necessary because, without a clear understanding of your insurance terms, you could be caught off guard by unexpected bills when you file a claim.
• Coinsurance is applicable both at network and non-network hospitals. However, the rate may be higher in the latter. Thus, check whether the healthcare professional is within your network so you will not be charged higher coinsurance payments.

How to Lower Your Coinsurance Costs?

There are several strategies to lower coinsurance in health insurance costs:

• Choose In-Network Providers: Healthcare providers in your insurance network often come with lower coinsurance rates.
• OPT for Preventive Care: Many health insurance policies offer free or low-cost preventive care. Utilising these services can help avoid more expensive treatments later on.
• Use Health Savings Accounts (HSAs): If eligible, contribute to an HSA to save money for healthcare costs, including coinsurance.
• Review Your Plan Annually: Healthcare requirements tend to change with time, so reviewing your plan annually is a good idea to ensure you are getting the best coverage for your needs.

Now that you have a clear idea of coinsurance in health insurance, you can make an informed decision when buying a health plan. Also, be sure to read the terms and conditions to make sure that you know the exact percentage you need to pay and prepare accordingly when filing a claim.