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Pros & Cons of Coinsurance

The purpose of buying health insurance is to limit your out-of-pocket expenses when dealing with medical bills. One item in health insurance plans that is used for this purpose is coinsurance. Coinsurance involves sharing the cost of health care bills on a percentage basis. While this part of a policy can have some benefits to you as a policyholder, it also has drawbacks.

  1. Limit Out-of-Pocket Expenses

    • One of the major benefits of using a policy that has coinsurance is that it limits your out-of-pocket expenses. With this type of feature in a health insurance policy, you only have to pay a small percentage of the total medical bills. Then the insurance company picks up the rest of the tab once you have reached a certain dollar amount. A typical coinsurance percentage is 80/20, with the insurance company picking up 80 percent of the tab and you picking up 20 percent.

    Lower Premiums

    • When choosing an insurance policy, you could select one without any coinsurance percentage. While this could limit your costs when dealing with a large bill, it can also make your health insurance premiums go up. When you choose a policy that has coinsurance, the insurance company provides you with a lower monthly premium. When you choose coinsurance, the insurance company knows that you will pay a larger percentage of the bill, so it offers lower monthly premiums.

    Uncertain Bills

    • One of the downsides of using a coinsurance feature with health insurance is that your medical bills will be uncertain. If you have a serious medical condition, you could end up paying a large amount of money out of your own pocket. Because your bill is based on a percentage instead of on a total dollar figure, you could get a bill for any amount. Many people do not enjoy this uncertainty and prefer to know a fixed dollar amount.

    Confusion

    • Insurance policies with coinsurance can be very confusing to the policyholder. When you have a medical expense, you have to determine if you have met your deductible first. Then the insurance company pays some benefits toward any other medical bills. At that point, you have to calculate a specific percentage of the rest of the bill up to a certain amount. It can be hard to know if everything is being calculated correctly by the insurance company.

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