Understanding Health Insurance Coinsurance: How It Works

Many health insurance plans contain a provision in which the insurance company shares the cost of coverage with the policyholder. This shared portion is known as coinsurance.

Function

• Coinsurance helps the policyholder defray some of the costs of medical insurance after she pays the deductible. The insured and the insurance company each pays for a specified percentage of the cost of a treatment or procedure.

Limits

• Coinsurance sometimes continues until the cost of the treatment meets a threshold amount. At that point, the health insurance plan pays the remaining balance.

Example

• Suppose you have a medical plan featuring a $200 deductible and 80/20 coinsurance up to $1,000. If you undergo a covered medical procedure that costs $2,500, you are responsible for the $200 deductible plus a coinsurance amount of $160 (20 percent of the remaining $800 up to $1,000) for a total out-of-pocket expense of $360. Your health insurance plan would pay $2,140.