Coinsurance, in plain terms.
Coinsurance is the percentage of a covered bill the employee pays after the deductible is met. Because it is a percentage, the size of the bill decides the size of the share.
Why coinsurance surprises people.
A flat copay is easy to picture. A percentage of an unknown bill is not.
The bill sets the amount
With 80/20 coinsurance the plan pays 80 percent and the employee pays 20 percent. On a 1,000 dollar allowed charge that is 200 dollars. On a 20,000 dollar charge it is 4,000 dollars, until the out-of-pocket maximum stops it.
It applies to the allowed amount
Coinsurance is figured on the rate the carrier has negotiated with the provider, not on the amount billed. Out of network, the gap between the two can fall on the employee.
It stops at the out-of-pocket maximum
Once the employee reaches the plan out-of-pocket maximum for covered in-network care, the plan pays covered costs for the rest of the year. Coinsurance has a ceiling.
It is not a copay
A copay is a fixed dollar amount for a service. Coinsurance is a share of the cost. Plans often use both, for different services.
Watch coinsurance work as the bill grows.
Illustrative plan: 1,500 dollar deductible, 20 percent coinsurance, 4,000 dollar out-of-pocket maximum. The sloped section is the coinsurance, and it stops where the line goes flat.
Illustrative figures to show the method. Real plans vary.
The bill
A 6,000 dollar allowed amount for a covered hospital service.
The deductible
The employee pays the first 1,500 dollars.
The coinsurance
20 percent of the remaining 4,500 dollars is 900 dollars.
The result
The employee pays 2,400 dollars and the plan pays 3,600 dollars.
We turn a percentage into a number an employee can plan around.
We run the same hospital bill through each plan option so the employee sees what 20 percent of a real bill looks like before choosing, not after.
Related pages.
The Copay, Explained in Plain Terms
A copay is a fixed dollar amount an employee pays for a specific service, such as a primary care visit or a prescription.
The Out-of-Pocket Maximum, Explained in Plain Terms
The out-of-pocket maximum is the most an employee pays in a plan year for covered, in-network care.
Avoiding Group Health Insurance Plan Confusion
The full guide to helping employees understand their group health plan.
Questions that come up next.
Short answers to the questions employees ask after this one. Each links to its own page.
What is the difference between a deductible and an out-of-pocket maximum?
The deductible is what an employee pays for covered care before the plan starts sharing the cost. The out-of-pocket maximum is the most the employee pays in a year for covered in-network care. One is where sharing begins, the other is where it ends.
Why did we get a bill after a visit that only had a copay?
Because the copay usually covers the visit itself and not everything billed around it. Lab work, imaging, a procedure, a facility fee or an out-of-network provider can each be billed separately.
Do copays count toward the deductible?
It depends on the plan. On some plans copays count toward the deductible and on others they do not. Copays generally do count toward the out-of-pocket maximum for covered in-network care, but confirm in your plan documents.
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General information about group health plan terms, not legal or tax advice. Plan-specific questions belong with the plan documents and the carrier.
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