Coinsurance
The percentage of covered costs a policyholder pays after meeting the deductible, with the insurer paying the remaining share.
What it means
Coinsurance splits costs between the insured person and the insurer once the deductible is met. A plan with 20% coinsurance means the person pays 20% of the allowed amount and the insurer pays 80%. It continues until the out-of-pocket maximum is reached, after which the insurer pays 100% of covered in-network costs for the rest of the plan year.
Unlike a copay, coinsurance scales with the cost of care, so it can be significant for expensive procedures. It is based on the plan’s allowed amount, not necessarily the provider’s full bill. In property insurance, coinsurance refers to a different rule requiring coverage of a minimum share of a home’s value.
Formula
Patient share = Allowed cost after deductible × Coinsurance rate (capped by the out-of-pocket maximum)
- Allowed cost = amount the plan recognizes for the service
- Coinsurance rate = the patient’s percentage, such as 20%
Example
Suppose a health plan has a $400 monthly premium, a $1,000 deductible, 20% coinsurance, a $30 primary care copay and a $4,000 out-of-pocket maximum. Once the deductible is met, a $5,000 bill costs the person $1,000 (20%) and the insurer $4,000. A much larger $21,000 bill would hit the $4,000 cap: the person pays $4,000 and the insurer $17,000.
How it’s used
- Estimating costs of surgery or hospital stays
- Comparing plans with different cost sharing
- Understanding medical bills
Related terms
Educational information only, not financial, tax or legal advice. Rules, limits and rates change; check the IRS, your lender or plan, or a qualified professional before acting.