Coinsurance Explained

Choosing the right healthcare plan means weighing lots of options — including coinsurance rates. But don’t be intimidated by all those numbers. Here’s how to break it down.

• If you don’t think you’ll meet your deductible. Keep in mind that coinsurance only comes into play after you’ve met your deductible. So if you’re looking at plans with a high deductible that you probably won’t meet (maybe because you’re generally healthy and don’t anticipate using a lot of healthcare, or you’re trying to keep your monthly premium cost down), don’t get hung up on coinsurance rates. Instead, choose a plan based on other factors such as whether or not it includes your preferred providers.
• If you do think you’ll meet your deductible. If you know you’ll be using your health insurance a lot this year — maybe you have a pre-existing condition, or you’re planning to start a family — and you’re likely to meet your deductible, then the coinsurance splits (i.e., who pays how much) will matter. Here’s what you’ll need to consider:
• If you want the insurance company to pay more. Take a look at the plans where you pay a smaller coinsurance percentage, say 20 or 10 percent. They look pretty good, right? When you opt for one of these plans, it means that once you meet your deductible, the insurance company is going to be paying the lion’s share of your medical costs that are subject to coinsurance.But there’s a trade-off. Take a look at the premiums for those plans: You’ll notice that they are higher. Now you need to decide: Can you afford the larger monthly outlay to get those coinsurance rates? If you can, go for it — you’ll likely save money in the long run.
• If you want to keep your monthly premium as low as possible. Let’s say you’re looking at a plan with a lower premium, where you’ll pay 30 or 40 percent coinsurance. This means you’re going to be on the hook for a larger percentage of some medical bills, even after you meet your deductible. Chances are, you’ll end up paying more overall for your healthcare during the course of the year when you add up premiums, deductibles, and your share of medical costs. But if you’re on a tight monthly budget, this might be your best option.

What else you need to know

There’s a limit to your out-of-pocket costs. The Affordable Care Act (ACA) puts a cap on how much you have to pay for your in-network healthcare every year — that’s called your out-of-pocket max. And it’s set by law. So your coinsurance payments won’t last forever — only until you reach your year’s max. After that, your insurer will cover in-network medical expenses. (Just remember that out-of-network services typically don’t count toward your out-of-pocket maximum.)

Coinsurance rates can vary within your plan. For example, a carrier may cover more of the cost when you stay overnight at a hospital than if you receive hospital treatment as an outpatient. This is one of those details that can surprise you later, so be sure to read your plan’s fine print. Or, if you’d like help, speak with a licensed broker to get advice.

Some medical expenses aren’t subject to coinsurance. When you look at the details of your plan, you’ll notice that some medical services (such as a visit to your primary care doctor) don’t have a coinsurance rate at all. Instead, they have what’s called a copay, where you pay a flat fee toward the service rather than a percentage of the total cost. Be sure to learn about copays, too.