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What are the basics of coinsurance?

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If you’ve ever struggled to grasp the ins and outs of your health insurance coverage, it’s not just you. It can often seem like health insurance companies are actively trying to confuse you by using overly complex terms and lots of fine print. 

You’ve probably heard of coinsurance, but may not be fully sure what it means or entails. Coinsurance is one type of way you pay for healthcare under certain insurance plans. 

Here, we’ll break coinsurance down for you, with the hope of making it not as tricky as it seems.

Useful health insurance terms to know

Let’s start with a primer on a few of the common terms in the insurance world.

  • Deductible:

     

    how much you pay each year before your insurance starts paying for the majority of your healthcare costs

  • Premium:

     

    how much you pay every month to keep your health insurance plan

  • Copay:

      a set amount you pay per medical expense that kicks in right away, and before you meet your deductible. For example, you might owe $10 per visit with your physician as your copay.

  • Network:

     

    the team of doctors and medical professionals covered by your health insurance. If you go out of network, you’ll likely pay more, and any expenses you pay probably won’t go toward your deductible.

  • Coinsurance:

     

    a percentage you pay for each medical expense, but only after you hit your deductible. This percentage depends on your plan (more on this below).

What is coinsurance?

If you live in the U.S., your healthcare probably isn’t free. Coinsurance is one of the ways you share the costs of your medical expenses with your insurance company. It’s a percentage of the amount you owe on something like a doctor’s visit.

Many people’s health insurance plans include coinsurance, but this isn’t the case across the board.

When do I pay coinsurance?

Coinsurance comes into play after you hit your deductible, which is how much you pay every year on covered services before your insurance kicks in. 

If your deductible is $1,500 per year, you’ll pay that much on health care services every year— after which your insurance will start to pay. Once you meet your deductible, you typically will only owe either coinsurance or a copay, which we’ll discuss below.

Usually, if your plan has a high monthly premium (the amount you pay each month to have the insurance), your coinsurance will be lower. But, if your monthly premium is lower, your coinsurance will be higher.

What’s the difference between a copay and coinsurance?

There are several key differences between a copay and coinsurance.

  • When you pay:

     

    you pay a copay before you hit your deductible, but you’ll only pay coinsurance after you’ve reached your full deductible.

  • How common it is:

     

    not all health insurance plans have copays, but most have coinsurance.

  • How much you pay:

     

    a copay is a set amount (such as $10 each time you see a doctor), whereas coinsurance is a percentage of the full amount you owe.

How much does coinsurance cost?

Here’s an example to make this simpler to understand. 

Let’s say you go to a doctor that costs $100 per visit. If you’ve  already reached your deductible for the year, your coinsurance kicks in toward this $100.00. The insurance policy you chose is what’s called an 80/20 plan, where you pay 20% of each medical cost in coinsurance, and your provider covers 80%. So, for this visit, you’ll pay 20% of $100, or $20. Your health insurance will pay the remaining $80.

How much you will actually pay depends on your plan. Typically, coinsurance requires you to pay between 10% and 40% of each expense.

Plan for your medical expenses better

To find out how much you owe for your deductible, copay, or your coinsurance, read over the health insurance documents you received when you signed up for your plan. These documents should outline exactly how much you’re expected to pay throughout the year.

Knowing what your coinsurance is can help you better plan out what you’ll pay for healthcare expenses. Whether it’s routine or emergency care, it’s important to have a good idea of the amount you’ll need to cover it to help avoid surprises with billing or the need to take on financial debt.

Unless otherwise noted above, opinions, advice, services, or other information or content expressed or contributed by customers or non-Varo contributors do not necessarily state or reflect those of Varo Bank, N.A. Member FDIC (“Bank”). Bank is not responsible for the accuracy of any content provided by author(s) or contributor(s) other than Varo.

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