Coinsurance is the amount of insurance paid once the deductible is met. This is not the same as a copay. That’s a form of a flat fee paid at the time of treatment. Coinsurance is a percentage of the total cost of health care.
Coinsurance starts after an insurance holder pays the maximum out-of-pocket costs for an individual or family policy. This amount is determined at the time the insurance is chosen. Some policies have a lower out-of-pocket payment which translates into higher coinsurance payments. Others have a lower percentage due to higher deductibles.
How Is Coinsurance Calculated?
The percentage paid by the policyholder depends on the allowed amount. This is the discounted amount health providers agree to charge. This means the policyholder can pay a different percentage for different treatments from the same provider. For instance, a dentist might set up a different coinsurance agreement for a general checkup over fillings.
As an example, a policyholder has 80/20 coinsurance. Once their deductible is paid, the insurance would then cover 80% of the covered costs. The remaining 20% would be paid by the policyholder. Thus, if a bill was $100, the out-of-pocket cost would be $20.
There are certain situations where coinsurance is only applied when a medical professional is in-network. This means they have agreed to take the insurance. Things might be different if the provider is out-of-network. In that situation, they might have a higher coinsurance or not have any at all.
Coinsurance percentages might be different depending on the type of treatment. Using the dentist as our example, a bi-annual checkup could have an 80-20 split or be 100% covered by the insurance provider. Conversely, a more intricate procedure like a root canal or wisdom teeth removal can have a 50-50 split.
Coinsurance in Other Policy Types
Coinsurance isn’t simply for health policies. It can also apply to insurance programs for vehicle insurance. For instance, an auto package might have a $500 deductible that the policyholder pays to repair their car. While most insurance companies cover the remainder of the costs, there are some which institute a coinsurance set up.
It’s different when it comes to property insurance. There, a coinsurance clause requires that a home is insured for at least 80% of its cash value. Therefore, a piece of property that’s $300,000 would need a policy that covers $60,000.