Coinsurance is one of the most important health insurance terms to understand when comparing healthcare costs. Unlike a copay, which is usually a fixed dollar amount, coinsurance is generally a percentage of the allowed cost of a covered healthcare service. For example, if your health insurance plan requires 20% coinsurance and the allowed amount for a covered service is $500, your share would generally be $100 after any applicable deductible requirements have been satisfied.
Understanding coinsurance can help you estimate your healthcare expenses and compare Health Insurance plans more effectively.
What Is Coinsurance in Health Insurance?
Coinsurance is the percentage of the allowed amount for a covered healthcare service that you are responsible for paying after meeting any applicable deductible. Common coinsurance percentages include:
- 10%
- 20%
- 30%
- 40%
Your health insurance company generally pays the remaining covered percentage according to the terms of your plan. For example, with 20% coinsurance, you generally pay 20% of the allowed amount while the insurance plan pays the remaining 80%, subject to the plan’s rules.
How Does Coinsurance Work?
Coinsurance usually becomes important after you have satisfied your health plan’s deductible, although the exact rules depend on the plan.
Consider this example:
| Item | Example |
|---|---|
| Allowed amount | $1,000 |
| Deductible already met | Yes |
| Coinsurance | 20% |
| Your coinsurance | $200 |
| Insurance plan share | $800 |
In this simplified example, you would pay $200 and your insurance company would pay $800 of the allowed amount. Actual costs can differ because of deductibles, copays, network rules, excluded services, balance billing, and other provisions of your health plan.
Coinsurance vs. Copay
Coinsurance and copays are both forms of cost-sharing, but they work differently.
| Coinsurance | Copay |
|---|---|
| Usually a percentage of the allowed amount | Usually a fixed dollar amount |
| Example: 20% | Example: $40 |
| Can increase when the cost of a service increases | Usually stays at the stated amount for the applicable service |
For example, a $40 copay remains $40 under the applicable plan rules, while 20% coinsurance on a $500 allowed amount would be $100. To understand the other common form of cost-sharing, read our guide to health insurance copays.
Coinsurance vs. Deductible
A deductible and coinsurance are not the same thing. Your deductible is generally the amount you pay toward covered healthcare expenses before the health plan begins paying according to the deductible rules. Coinsurance is generally the percentage of the allowed amount that you pay after any applicable deductible has been met.
For example, imagine a plan with:
- $2,000 deductible
- 20% coinsurance
- $8,000 out-of-pocket maximum
You may first pay eligible expenses toward the $2,000 deductible. Once the deductible is satisfied, you may then pay 20% of the allowed amount for covered services while the insurer pays the remaining 80%, until you reach the applicable out-of-pocket maximum. The exact order and rules can vary by plan, so always check the plan documents.
Does Coinsurance Apply Before the Deductible?
In many health insurance plans, coinsurance applies after the deductible has been met. However, this is not a universal rule for every service or plan. Some services may have separate cost-sharing rules, including certain preventive services or services with a copay. Do not assume that every healthcare expense will follow the same deductible and coinsurance structure.
What Is an Allowed Amount?
The allowed amount is an important concept when calculating coinsurance. It is generally the amount a health insurance plan recognizes for a covered service when determining payment under the plan’s rules. For an in-network provider, the provider typically agrees to the negotiated rate or applicable allowed amount. For example, a healthcare provider might have a higher standard charge for a service, but the insurance plan’s allowed amount may be lower. If the allowed amount is $600 and your coinsurance is 20%, your share would generally be $120, assuming the deductible has been met and no other cost-sharing rule applies.
Why In-Network Providers Matter
Your provider’s network status can have a major effect on what you pay. When you use an in-network provider, the provider generally has an agreement with your insurance company. This can give you access to negotiated rates and the cost-sharing rules associated with your plan. Out-of-network care may have different deductibles, coinsurance rates, or coverage rules. Some plans may also provide little or no coverage for certain out-of-network services. Before receiving non-emergency care, check whether the provider and facility are in your plan’s network.
Does Coinsurance Count Toward the Out-of-Pocket Maximum?
Eligible coinsurance payments generally count toward the out-of-pocket maximum when they are covered cost-sharing expenses under the plan. The out-of-pocket maximum is the limit on what you generally pay during a plan year for covered services under the plan’s applicable cost-sharing rules. Once you reach the applicable out-of-pocket maximum, the plan generally pays 100% of covered benefits for the remainder of the plan year, subject to the plan’s terms. Premiums, services the plan does not cover, and certain out-of-network costs may not count toward the limit.
Coinsurance Example With a Deductible
Let’s look at a simplified example. Suppose your health insurance plan has:
- $1,500 deductible
- 20% coinsurance after the deductible
- $7,000 out-of-pocket maximum
You receive a covered service with an allowed amount of $3,000 and have not paid anything toward your deductible yet. You may first be responsible for the applicable $1,500 deductible. The remaining $1,500 would then be subject to 20% coinsurance. Twenty percent of $1,500 is $300. Under this simplified example, your total responsibility would be $1,800, while the insurer would pay $1,200 of the $3,000 allowed amount. Actual claims can be more complicated, so this example is intended only to demonstrate the basic concept.
What Happens After You Reach Your Out-of-Pocket Maximum?
Once you reach your plan’s applicable out-of-pocket maximum for covered services, your health plan generally pays 100% of covered benefits for the rest of the plan year. This can significantly reduce your additional cost-sharing for covered care during the remainder of that plan year. However, the maximum generally does not mean every healthcare expense becomes free. Premiums and certain services or expenses outside the plan’s covered benefits can be treated differently.
Why Coinsurance Can Be Expensive
A percentage-based cost can become significant when the underlying healthcare service is expensive. For example, 20% coinsurance on:
- $500 = $100
- $2,000 = $400
- $5,000 = $1,000
- $10,000 = $2,000
This is why looking only at a plan’s monthly premium can give you an incomplete picture of your potential healthcare costs.
How Coinsurance Affects Health Insurance Costs
When comparing health insurance plans, coinsurance should be considered alongside other costs. Important factors include:
- Monthly premium
- Annual deductible
- Coinsurance percentage
- Copays
- Out-of-pocket maximum
- Provider network
- Prescription drug costs
- Coverage for services you expect to use
A plan with a lower coinsurance percentage may appear attractive, but it could have a higher premium or deductible. Likewise, a plan with a lower monthly premium may have higher cost-sharing when you actually receive healthcare.
Coinsurance in High-Deductible Health Plans
Some high-deductible health plans use coinsurance after the deductible has been met. For example, a plan could require you to pay the full negotiated cost of eligible services until you meet the deductible and then require 20% coinsurance for covered services afterward. Some preventive services may be covered without cost-sharing when applicable federal requirements are met. If you are considering a high-deductible plan, look at the deductible, coinsurance, out-of-pocket maximum, and eligibility for a Health Savings Account rather than focusing only on the monthly premium.
How to Find Your Coinsurance Rate
Your coinsurance percentage is normally listed in your health plan documents.
You can check:
- Summary of Benefits and Coverage
- Evidence of Coverage
- Insurance company member portal
- Plan policy documents
- Insurance company’s customer service
If you are planning a major medical procedure, ask your insurer about the expected allowed amount and your estimated cost-sharing before receiving care whenever possible.
Common Coinsurance Mistakes to Avoid
Assuming coinsurance is the same as a copay
A copay is generally a fixed dollar amount, while coinsurance is generally a percentage of the allowed amount.
Ignoring the deductible
The amount you pay can be substantially different before and after meeting your deductible.
Ignoring network status
Out-of-network care may have different cost-sharing rules and can expose you to additional expenses.
Looking only at the percentage
A 20% coinsurance rate may sound reasonable, but 20% of a large medical bill can still be a substantial amount.
Forgetting the out-of-pocket maximum
The out-of-pocket maximum is an important part of understanding your potential financial exposure during a plan year.
Frequently Asked Questions About Coinsurance
What does 20% coinsurance mean?
It generally means you are responsible for 20% of the allowed amount for a covered service after any applicable deductible requirements are satisfied.
Is coinsurance better than a copay?
Neither is automatically better. A copay provides a fixed amount for an applicable service, while coinsurance is based on a percentage. Which is more affordable depends on your plan and healthcare needs.
Does coinsurance apply after the deductible?
Often, yes. Many plans require the deductible to be met before coinsurance applies, but the exact rules depend on the plan and service.
Does coinsurance count toward the deductible?
Coinsurance generally applies after the deductible rather than counting toward it, but your specific plan documents determine how cost-sharing works.
Does coinsurance count toward the out-of-pocket maximum?
Eligible coinsurance payments generally count toward the plan’s out-of-pocket maximum for covered services, subject to the plan’s rules.
Can I have both copays and coinsurance?
Yes. A health insurance plan can use copays for some services and coinsurance for others.
How PolicyHelpUSA Can Help
Health insurance costs can be confusing when deductibles, copays, coinsurance, premiums, and out-of-pocket maximums all work together. PolicyHelpUSA provides easy-to-understand educational guides that explain these terms and help consumers understand how health insurance plans are structured.
