What Is Insurance Coinsurance?

Understanding your health insurance plan is essential to receiving appropriate service and treatment and to minimize confusion caused by complicated cost-sharing calculations. As the cost of health insurance has increased, carriers have implemented techniques to try to maintain affordable premiums. One of these, termed co-insurance, aims to reduce premiums by raising expenses for treatment. Co-insurance plans are less expensive than traditional managed care health plans, but they are also more confusing and may require active record keeping.

Co-insurance Defined

• Co-insurance is a cost-sharing arrangement between insurers and plan members. In most co-insurance plans, any hospitalization or treatment received other than normal and expected annual physicals will be paid for by both the carrier and the member.

Function

• In addition to reducing premium costs, forcing insured members to pay for a portion of medical services also serves to reduce the likelihood of unnecessary specialist visits and testing procedures. Also, if a large enough number of insurance plans use cost-sharing designs, health insurance carriers may save enough money to keep premiums more affordable.

Deductibles

• The majority of co-insurance plans are designed with deductibles that must be met before any cost-sharing occurs. When you receive hospital treatment, or other non-routine services, you must pay the entire cost of that care until you have spent an amount equal to your deductible. Only after your deductible has been fulfilled will the insurance carrier begin to share in the remaining costs. Deductibles vary widely, typically ranging from $500 to $5,000.

Calculating the Cost

• Any balance remaining for your medical treatment after your deductible has been paid will be split between you and the insurance company per the provisions of your particular co-insurance plan. In most cases, the carrier bears the larger percentage of the bill, and most co-insurance plans are designed to leave insured members responsible for 10 percent to 30 percent of their invoice balance.

Maximum Out-Of-Pocket

• To prevent you from ending up with medical bills that are impossible to pay, or those that could threaten your financial stability, co-insurance health plans are designed with a stop-loss amount called a maximum out-of-pocket or MOOP. When the combination of your deductible and co-insurance portions have met or exceed the MOOP, all remaining costs become the responsibility of the insurance carrier. Depending on the specific treatment you receive, your MOOP can be reached with just one procedure, it may take several months or it may never be reached. MOOP amounts will vary but are typically between $5,000 and $10,000.