Health insurance has different types of costs that affect how much you are to pay over a year. One of the health insurance cost types is co-insurance. This type of health insurance determines how much you pay for health services after you have reached the deductible of your health plan. But what is it, and how does it work?
Co-insurance is the amount of a covered health cost you are required to pay after you have met your deductible. Generally, this works on a fixed ratio, meaning the same percentage of the total bill will be charged every time. This type of cost is common in health insurance from different insurance companies.
Aside from health insurance, property insurance policies also practice coinsurance, but in this case, the property owner’s coinsurance is the amount of coverage they must buy for a structure. This write-up contains information about this concept and how it works.
How Does It Work?
As previously stated, coinsurance is the percentage of a health service amount you must pay after satisfying your deductible. A deductible is an out-of-pocket payment you make yearly for eligible medical services and medications before some of your medical care bills are paid by your health insurance plan.
Immediately after you satisfy your deductible, the cost will be split between you and your health insurance company through co-insurance until you complete your out-of-pocket payment limit. This process favors most policyholders because they get to pay less than the insurance company. It means you are sharing the bill with your health insurance company, but you pay less.
Your health insurance percentage may be 20% while your health insurance company will pay the 80% left. However, one way you pay for health insurance, while other ways are premiums, deductibles, and copays.
How do you know Co-Insurance Costs?
The out-of-pocket payments you make depend on your health insurance plan. Most health insurance companies reveal their financial responsibilities for your healthcare depending on the plan and payment structure. For instance, if you are required to pay 20% of health service costs through this insurance, you will have to pay your deductible first and split the balance left with your health insurer based on your policy terms.
How Much Does it Cost After You Reach Your Deductible?
The percentage you are to pay after the deductible depends on your health insurance plan. An example is:
You have an in-network process coming up that will cost $25,000, and the below structure is your health insurance plan:
| Deductible | Co-insurance | Out-of-pocket Maximum |
| $5,000 | 25% | $7,500 |
Under these terms, you would be required to pay a $5,000 deductible before your insurance company carries its share. This means that your bill balance would be $20,000 after you have paid the deductible.
After that, you pay 20% of your insurance policy and about $7,500 out-of-pocket maximum. You will also pay $5,000 because of your 25% out of $20,000. However, once you exceed that out-of-pocket maximum for the year, 100% of healthcare services will be paid by your health plan.
Co-insurance vs. Copay
Co-insurance and copay are both ways insurance companies spread risk among their policyholders. Copayments, abbreviated as copay, are fixed percentages you pay for certain health services. These services may also apply to co-insurance, but copay amounts are predetermined, and they don’t depend on the cost of the health service.
Another difference between co-insurance and copay is that co-insurance only plays out after your deductible has been met, while copay can play out before and after your deductible has been met.
Co-insurance and Out-of-Pocket Maximum
Co-insurance payments are added to your out-of-pocket maximum, meaning that you will need to pay the co-insurance amount until you exceed your out-of-pocket maximum. Immediately you get to the maximum, you will no longer pay co-insurance, and 100% of the health service cost will be covered by your insurance company.
Co-insurance vs. Deductible
Generally, deductibles are the actual amount you are required to pay before your coinsurance plays in. For instance, if you have a $2,000 deductible, you are required to pay the complete $2,000 for the year before part of your health service costs will be covered by your health insurance.
After satisfying your deductible, you may be required to pay co-insurance. However, stay aware that some preventive services like vaccines, routine check-ups, and screenings may not be rounded up to a deductible.
