The cost of healthcare services is increasing at a rapid rate because of medical inflation. So, it is more important than ever to invest in your health and well-being by getting health insurance coverage.
Having insurance to cover your healthcare costs helps you save money and avoid hefty financial strain in case any medical emergency occurs to you or your loved ones.
Now, we know what you’re thinking. Health insurance can be costly. However, this isn’t true. There are plenty of affordable options and many feature a cost-sharing arrangement known as coinsurance.
So, what exactly is coinsurance and how do medical claims work with coinsurance? Here’s everything you need to know.
What Is Coinsurance?
Health insurance is vital and having coinsurance means that the costs of your medical care are split between you and your insurance provider.
Coinsurance is your share of the cost of your healthcare services after your deductible. This is generally a percentage of the cost of the service.
Coinsurance is a form of cost-sharing – a typical feature of most health insurance plans. What this means is that your health insurer pays a portion of your medical costs, and you cover the rest.
How Does Coinsurance Work?
Coinsurance is pretty straightforward. Simply put, your insurance will pay a portion of your health services, and you’ll pay the rest. Usually, the insurer pays the lion’s share of the costs of your health care.
For example, if your health care plan has an 80/20 coinsurance, it means that your insurer pays 80% of your medical expenses and you’ll pay the remaining 20% of the costs. This goes for any coinsurance percentage rates. For example, if you have a 50%/50% coinsurance plan, your insurer will pay half of the medical costs, and you’ll be liable for the other half of the costs.
A general calculation of an 80/20 plan could be if your medical bills cost $1,000, your insurer will cover $800 of those costs, and you’ll pay the remaining $200.
It is important to note that typically, the terms of a coinsurance plan only apply after you’ve reached your policy’s out-of-pocket deductible amount. The exact terms of your coinsurance will depend on the plan you choose.
As a general rule of thumb, insurance plans with low monthly premiums have higher coinsurance, and plans with a higher monthly premium have lower coinsurance. The plan you choose will depend on your lifestyle and financial health.
Factors Affecting Coinsurance Rates
There are a few factors that directly and indirectly affect coinsurance rates. It is important to note that these factors also directly affect your monthly insurance premium.
- Age: It goes without saying that your age directly affects your insurance premiums and could indirectly affect your coinsurance rates. Usually, the older you are, the higher your premiums will be. This could affect your coinsurance rates by lowering the rates your insurer will offer you.
- Medical History: Your medical records are also an important factor in deciding your monthly premium. If you have a history of illness or any pre-existing conditions, your premiums will be higher than if you are relatively healthy.
- Occupation: While it might not seem like it matters, your occupation is considered when deciding your premiums. If your job exposes you to some amount of risk, your premiums will be much higher than if you had a low-risk job.
- Smoking Habits: It should come as no surprise that smoking habits directly affect your premiums and coinsurance rates. Smoking negatively impacts your health. Therefore, smokers are more likely to pay higher premiums and have a higher coinsurance rate.
- Insurance Plan: Your monthly premiums and coinsurance rates will vary depending on the insurance plan you choose. It might also be affected by any add-on services or cover you go for. For example, group insurance policies often have lower premiums while individual cover has higher premiums. But, it is important to note that these terms will vary between providers.
The Advantages And Disadvantages Of Coinsurance
The biggest advantage to having an insurance plan with coinsurance is being able to enjoy lower monthly premiums. Depending on the insurance plan you choose, and how you utilize your plan, you could completely avoid having to dip into your coinsurance at all.
Having coinsurance also acts as a safety net when you do need to pay medical builds as you’ll only need to pay a portion of the costs.
However, much like general insurance terms, coinsurance comes with its own terms and conditions. Some of these can have minor disadvantages. For example, you could incur some costly out-of-pocket medical expenses depending on your insurance plan and coinsurance plan.
If you choose a high coinsurance healthcare plan, you could end up paying more for covered healthcare services out-of-pocket than you would if you had a lower coinsurance plan.
High coinsurance plans usually also have high deductibles. In these cases, you could end up paying 100% of the healthcare expenses until you’re able to meet your deductible.
You could also incur additional costs if you regularly visit your primary care doctor and specialists for treatment related to a chronic condition, or if you’re hospitalized for an unexpected injury or illness.
Common Coinsurance Rates
Coinsurance rates can vary depending on your healthcare plan. Often, coinsurance rates are divided into various tiers. Your coinsurance rates will vary depending on where your healthcare plan finds itself within these tiers. Usually, there are three levels:
- The lower tiers can range from 30% to 60% of your health expenses
- Mid-tier plans often cover 70% of your expenses
- Higher-tier plans generally cover 80% to 90% of your healthcare expenses.
80% Coinsurance Explained For Medical Claims
80% coinsurance follows the rate of 80/20. This means that your insurer covers 80% of your healthcare costs while you cover the remaining 20%.
For example, let’s say your plan entails the following:
- Deductible: $1,000
- Coinsurance: 80/20
- Out-of-pocket maximum: $5,000
Say your covered medical treatment costs $6,000. In this case, you’ll pay your deductible of $1,000 first. Then you’ll pay 20% of the remaining $5000 ($1000 coinsurance).
Therefore, your total out-of-pocket costs would be $2,000 (your deductible plus your coinsurance). Your insurance provider will pay the remaining balance ($4,000) of your medical claim, which is 80% of the cost after having taken off your deductible.
If your total out-of-pocket costs reach $5,000 (your out-of-pocket maximum) for covered medical services, your insurance will cover the rest of your medical costs (for covered services and up to the maximum policy limit) for the plan year.
Alternatives to 80% Coinsurance
A copay is a great alternative to coinsurance. While both copay and coinsurance mean splitting the costs of your healthcare between yourself and your insurer, there are a few key differences.
Unlike coinsurance, which is presented as a percentage, copay offers clients a set dollar amount. It also allows clients to pay this amount over the course of the year. This makes it easier for you to budget for your medical bills.
With coinsurance, you’re liable to pay all costs immediately.
Conclusion
Everyone deserves access to good healthcare and, with reliable health insurance, this is possible. Getting health insurance can be intimidating but there are so many plans out there that you’re sure to find one that suits your needs.
Coinsurance is a fantastic way to gain access to the care you need without having to break your budget.
If you’re looking for an insurance policy with coinsurance, contact us today. At Enhance Health, we’ll take you through all the best options for your needs to help you select the right insurance plan for you.
