Co-insurance is a cost-sharing practice between the health insurance company and the policyholder. It’s calculated as a percentage of medical expenses. Once the policyholder reaches their annual deductible, they’ll start paying co-insurance. After that, the health insurer pays the remaining costs.
The insurer may apply different co-insurance percentages to each health service. So you might pay for additional doctor visits, lab work, prescription drugs, and other needs.
For example, the co-insurance for a primary care doctor in your network might be 20%, but the co-insurance for a primary care doctor outside your network might be 75%.
Example: How Co-Insurance Works?
Here’s an example of how co-insurance costs work:
Arjun’s health plan has 80/20 co-insurance. This means that after Arjun has met his deductible, his plan pays 80% of covered costs, and Arjun pays 20%.
Co-insurance vs. Co-pay: What’s the Difference?
In insurance, there exists a co-pay also. Copays (or copayments) and co-insurance are very similar except for one key difference: While co-insurance is a percentage of the total cost, a co-pay is a flat fee.
Example: In the above example, if you had a treatment that called for co-pays instead, there is a Co-Pay of Rs 1000, and the medical bill is Rs 5,000, then the first Rs 1,000. If there is a co-insurance of 80/20 instead of a co-pay, then for the medical bill of Rs 5,000, the insurance company will pay Rs 4,000 (i.e., 80% of Rs 5,000), and the rest of the amount would need to be produced by Arjun.
The advantage of a co-pay is that it allows for greater predictability for the consumer, and they are generally more affordable. With a co-pay, you know you will pay a set amount to see your doctor for any reason. With co-insurance, you pay a percentage of the visit, so the higher the underlying bill, the more you’ll be required to pay.
What is Coinsurance After Deductible?
Co-insurance does not begin until you meet your deductible, meaning you’ll pay all your medical costs (except for specific covered services) until your deductible is reached. Then, you will pay only a percentage of the costs while the insurance company covers the rest.
With a co-pay, it’s easy to know how much you can expect to pay for a particular service or treatment. But because co-insurance is a percentage of the service, it can be harder to predict your out-of-pocket costs.
The first thing you should do when determining your co-insurance payment is to find your plan’s co-insurance rate for the service needed.
Some plans offer the same rate for all services. But other plans come with different co-insurance rates for additional services. For example, you might be asked to pay 20% for a visit to your primary care physician, 30% for a specialist, 40% for an emergency room visit, and 15% for medication.
Next, determine if your co-insurance rates vary based on whether you visit a physician inside or outside a preferred network of hospitals.
Example: Co-Insurance after Deductible
If, in the above example, there is a deductible of Rs 2,000 and a co-insurance clause of 80/20, then for a medical bill of Rs 5,000, the initial amount of Rs 2,000 would need to be paid by Arjun under the deductible clause, and for the remaining Rs 3,000, co-insurance will apply, i.e., Rs 2,400 would be paid by the insurance company and remaining Rs 600 need to be paid by the insured, i.e., Arjun.
Bottomline: Co-insurance Reduces Insurance Premium
Co-insurance is essential because it helps to control costs. Sharing the cost of medical care between the insurance company and the insured person helps keep premiums down. It also incentivizes people to be more careful about their health since they are directly responsible for medical bills.
If you’re covered by a health insurance plan with a co-insurance requirement, it’s essential to understand how it works to make the most of your coverage.
