What Is Coinsurance?

In this article...
  • Coinsurance is a type of out-of-pocket expense associated with health insurance. Learn what coinsurance is, how it works and how it differs from co-pays.

Understanding the different out-of-pocket costs involved in your health insurance policy is essential for choosing an affordable plan, but many people become confused by how they work. Most health insurance plans include coinsurance, which you'll pay when you receive covered services. This article explains what coinsurance is and how it differs from co-pays and deductibles.  

What Is Coinsurance?

In terms of health insurance, coinsurance is the percentage you pay toward your healthcare costs after meeting your deductible. Health insurance policies have an annual deductible, which means you must pay that amount out of pocket toward your care before your insurer starts paying. After that, you pay the coinsurance whenever you receive covered services, and your insurer pays the balance.

The most common coinsurance amount charged by insurers is 20%. You might see this described as 80/20, which means your insurer pays 80%, and you pay 20%. However, some insurance policies require higher coinsurance percentages, making your out-of-pocket treatment costs higher. On the other hand, you'll usually pay lower monthly premiums for policies with higher coinsurance. 

What's the Difference Between Coinsurance and a Co-Pay?

A co-pay is another type of out-of-pocket cost associated with health insurance. Unlike coinsurance, a co-pay is a flat dollar rate you pay when you receive certain services. Furthermore, co-pays usually apply before you meet your deductible. For example, if your plan charges a $50 co-pay to see a specialist, you only pay $50 for the service — whether or not you've met your deductible. 

You'll usually pay a co-pay whenever you visit your primary care doctor (except for preventative healthcare), a specialist or the emergency room. Co-pays also tend to apply to urgent care and drug prescriptions, and the amount depends on the service you receive. Meanwhile, you'll always pay the same coinsurance percentage, regardless of the overall cost of your treatment. 

How Does the Out-Of-Pocket Maximum Affect Coinsurance?

Your health insurance policy has an out-of-pocket maximum, which is the highest amount you can pay out of pocket before your insurer covers 100% of your medical fees. Any co-pays or coinsurance payments count toward your out-of-pocket maximum. However, the following expenses don't contribute:

  • Health insurance premiums
  • Fees for non-covered services
  • Out-of-network treatment
  • Any costs exceeding the insurer-approved amount for covered services

The out-of-pocket maximum varies widely between plans, but legal limits are in place if you purchased your plan through the ACA Marketplace. As of 2022, the out-of-pocket maximum for an individual can't exceed $8,700. Meanwhile, the limit for family policies is $17,400. 

In-Network vs. Out-of-Network Coinsurance

An in-network provider is a clinic, pharmacy, hospital or practitioner contracted by your insurer to provide services. Therefore, all in-network providers agree to charge the insurer's approved amounts for covered services. 

In contrast, an out-of-network provider doesn't have a contract with your insurer. This means they may charge significantly more than the approved amount for your care. Some insurers don't cover out-of-network treatment, while others cover a certain amount. 

Often, insurers charge a higher coinsurance percentage if you decide to use an out-of-network provider. You may also have to pay the difference between the approved amount and what your provider actually charges. For example:

An in-network provider charges $300 per visit, which is your insurer's approved amount. You've already met your deductible, and your policy requires you to pay 20% as coinsurance. Therefore, you'll pay $60, and your insurer will pay the remaining $240. 

Meanwhile, an out-of-network provider charges $400 for the same service, and the same policy charges 30% coinsurance for out-of-network services plus the cost difference. Therefore, you'll pay $80 coinsurance, plus the $100 difference, costing you $180 altogether. 

Insurers often require you to make up the difference when visiting an out-of-network provider if you pay a co-pay. Therefore, it's almost always cheaper to use an in-network provider. However, that doesn't mean you should avoid seeking urgent treatment if you're sick or injured and can't access an in-network provider. Insurers can't charge higher co-pays or coinsurance rates for out-of-network emergency room visits. 

How Does Coinsurance Work for Marketplace Plans?

Most health insurance policies purchased through the ACA Marketplace have co-pays and coinsurance clauses. The Marketplace allocates each policy a tier depending on how much you pay out of pocket when you receive services — Bronze, Silver, Gold or Platinum. These are often known as metal tiers. 

Each tier has an out-of-pocket average that includes co-pays and coinsurance. Therefore, you can get a rough idea of how much you'll pay for covered services before buying your plan. However, as this amount includes co-pays, your coinsurance percentage could be lower than your tier's cost-sharing value. The average out-of-pocket costs for each tier are:

  • Bronze: 40%
  • Silver: 30%
  • Gold: 20%
  • Platinum: 10%

Generally, the lower the out-of-pocket costs associated with an ACA Marketplace plan, the higher the monthly premiums. Therefore, Bronze plans usually have the lowest monthly premiums, while Platinum plans have the highest. However, it's essential to ensure you can afford the higher point-of-care costs before opting for plans with the most affordable premiums. 

Remember that these figures only represent average costs for visiting an in-network provider. The costs could be significantly higher if you choose an out-of-network provider. 

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