If you've ever had your insurance covering a health service, you must have heard of coinsurance and had to pay it even though you had no clue what it meant.
In this article, you will learn what coinsurance is, how it differs from copayment, the associated out of pocket costs such as yearly limits, out of pocket maximums, and deductibles. You will also know when coinsurance payments become active and how you can lower your coinsurance rates.
Coinsurance is a percentage of medical expenses you pay after your health insurance provider pays for their coverage. It doesn't become active till you meet your deductible. Your plan may cover 80% of your health cost, and you have to pay a 25% coinsurance.
The information in this article is accurate as it has been collated from reputable sources such as the Healthcare.gov website, various states' Department of Insurance, numerous health insurance providers, and health insurance industry watchers.
What Is Coinsurance?
Coinsurance is the amount a health insurance policyholder (you) pay down as your portion towards a claim. It can be defined as a type of cost-sharing, where you split a healthcare-related expense between you and your health insurance company.
Generally, coinsurance is only paid when you meet your yearly deductible. To understand this concept better, let's use a 25% coinsurance rate for this example.
A 25% coinsurance translates to your health insurance company paying 75% of your health care costs while you pay for the remainder. Coinsurance is only applicable in particular procedures, medication, and office visits.
For instance, if you visit the doctor for an examination and it costs $100, your health insurance provider pays $75 while you pay the remainder $25 out of pocket.
If your primary doctor is unable to give the treatment for your ailment and you have to be referred to a specialist. The specialist could charge you $200, meaning you would have to pay $50 while your health insurance provider pays $150.
While the equation above might seem simplistic, it is important to remember what you are obliged to pay for under your coverage and the terminology included. Every health insurance plan differs from the next, and things such as coinsurance and coverage might be more or less, depending on the health insurance provided.
Is Copay The Same Is Coinsurance?
You've likely heard of copayments or copay. They are quite similar to coinsurance. However, they do have one distinct difference. While your coinsurance is a portion of the overall costs, your copayment is a fixed fee.
If, for example, your doctor visit falls under a copay rather than coinsurance on your coverage, you will be requested to pay a fixed fee of $25, regardless of if the doctor's visit costs $200 or $500. PPOs are known to have these arrangements where patients make copays for every doctor or ER visit.
The aforementioned visit to your specialist might incur a copay of $35, irrespective of the healthcare services offered. A great benefit of the copay is that it provides greater certainty for a policyholder.
Copays are easier to calculate; they are fixed, so you really don't need a calculation. They may also be more affordable than coinsurance. With a copayment, you know the fixed amount you have to pay regardless of the cost a service incurs. Conversely, coinsurance requires you to pay a percentage of the health care service.
This means that if the overall bill is higher, your coinsurance will also be high. Being able to understand what these minute but important differences are can be quite challenging and even time-consuming.
Thankfully, the Affordable Care Act makes it much easier to compare the coinsurance and copays of competing healthcare plans. This can be done using the Federal Marketplace, which is an insurance exchange mandated by the ACA.
Does The Coinsurance Kick In Before Or After The Deductible?
Your coinsurance doesn't kick in till you meet the required deductible. This means that you will need to pay 100% of your healthcare costs, except covered services, until you meet your deductible.
Only after this milestone will you pay a portion of your healthcare costs while your health insurance provider pays the remainder.
How Can I Calculate My Coinsurance Payments?
Unlike a copayment with a fixed rate of how much you are expected to pay for medical services, coinsurance payment can be much difficult to determine, as it is usually a fraction of the medical service costs.
If you want to calculate how much your coinsurance should be, you will need to first find out your health insurance policy's coinsurance rate for that particular service.
Some health insurance plans have one rate for every service. However, other health insurance policies have varying coinsurance rates for each of the services under their coverage.
For instance, you may have to pay 10% of the cost of a wheelchair, 20% for a dentist's visit or visiting a specialist, 10% for medication, and 35% for emergency care.
The next after would be to discover what the coinsurance rates are for out of network medical facilities. Plans like PPOs allow policyholders to visit out of network healthcare providers. However, they command higher coinsurance rates for the privilege.
The most effective way to determine your coinsurance rate is first to convert the percentage into a decimal, multiply it by the overall cost of your medical expense. The result would be your required coinsurance.
For instance, if the coinsurance rate is 30% and the overall cost of the specialist visit is $500, your coinsurance payment would be $175.
Is There A Way To Lower My Coinsurance Rates?
There is a way you can lower your coinsurance rates. A CSR or Cost Sharing Reduction subsidy can be available to policyholders that buy a silver tier policy via the public exchanges.
Additionally, they also have to meet the premium tax credit criteria by earning anything from 100 to 200% of the federal poverty level.
This subsidy can help lower deductibles, out of pocket maximums, copayment and coinsurance by raising the health insurance policy's actuarial value
Some plans provide 100% after the deductible, which essentially means 0% coinsurance. To a holder of such a health insurance plan, it means once the deductible has been attained, the health insurance provider has to pay the entirety of your healthcare expenses without you needing to make a coinsurance payment.
Apart From Coinsurance and Copay, Are There Other Out-of-Pocket Costs?
The term out of pocket costs is given to copays and coinsurance. It means that they are additional costs on top of your premium that have to be paid when you get any healthcare service. In some instances, a health insurance provider might charge coinsurance for one service type and a copay for another.
To completely understand the idea behind out of pocket expenses, we have to highlight three extra terms: yearly limits, out of pocket maximums, and deductibles.
Yearly Limits
Your yearly limit is a deductible's opposite. It is the maximum amount of money your health insurance provider will pay for your healthcare costs in a particular year. Once that limit is reached, you will have to pay for 100% of your healthcare costs.
Fortunately, the ACA includes provisions that bar health insurance providers from placing yearly limits on the majority of health services for individual and employer-sponsored plans.
Out Of Pocket Maximum
The clue is in the name: it is the maximum amount you are legally allowed to pay as out of pocket expenses during a particular policy year. When you get to that limit, your health insurance provider takes over, paying 100% of the costs incurred during that year.
Your copays, coinsurance, and deductibles all count towards the out of pocket maximum set by an insurance provider.
Deductibles
A deductible is a fixed amount you have to pay first for your healthcare costs before your health insurance provider begins to pay. For instance, if your insurance policy has a $500 deductible, you will have to pay the first $500 of your medical expenses during that year.
Only after you have paid $500 will your health insurance company begin covering its part of your healthcare bills. Deductibles, however, do not apply to every healthcare service. Numerous health insurance policies cover the basics, such as prescription drugs and routine services.
The ACA requires health insurance services not to charge preventive care such as immunizations, mammograms, and annual exams with a deductible, copay, or coinsurance.
Plans with high deductibles typically have reduced premiums. This means you pay less for your plan every month but have to pay more out of pocket before your policy begins contributing.
There are also home insurance policies without deductibles. However, they aren't as common. It is important to know that deductibles are different from coinsurance and copayment a. Copayments are generally required prior to and after meeting the deductible limit.
Some health insurance policies count company's towards the deductibles, while others don't.
What Is The Actuarial Value Of A Health Insurance Plan?
The actuarial value of a health insurance policy is its true worth. This means it's out of pocket maximums, deductibles, coinsurance, copayment, coverage, and everything else concerning a health insurance policy.
Actuarial value is the calculation of a plan's coverage tier after the benefits and expected expenses have been applied.
It is a way of determining a health insurance policy's value to a policyholder. When a plan has a higher actuarial value, it means the plan is generous.
