What You Need to Know About Coinsurance

Coinsurance is a type of cost-sharing to pay for health care. With coinsurance, both you and your insurance provider pay part of a medical bill.

This article will explain what coinsurance is, how it works, and how to figure out how much you will have to pay.

What Is Coinsurance?

With most health insurance plans, patients pay a set amount for the services they get throughout the year. This is called an annual deductible.

Once a patient has paid their deductible, they still have to pay some costs for care—however, their insurance plan will pay some, too. This arrangement is called coinsurance.

When coinsurance kicks in, a patient pays a percentage of the cost of the service their plan has approved. In the case of the Health Insurance Marketplace, coinsurance ranges from 10% to 40%, depending on the plan level. The health plan will pay the other 60% to 90%.

The coinsurance percentage is usually applied in addition to the deductible. That means the deductible must be met before the insurance provider will start paying.

However, this does not apply to services that are covered in full without a deductible, like some preventive care services. It also does not apply to services that are covered with a copay instead of coinsurance, like seeing your primary care provider.

Out-of-Pocket Maximum

Coinsurance is part of the total amount the health insurance company can require patients to pay in cost-sharing during the year. This is called the out-of-pocket maximum. Deductibles, copays, and coinsurance are included in the amount.

Once the amounts paid in deductibles, copayments, and coinsurance add up to a patient’s out-of-pocket maximum, their health plan will start to pick up the cost of covered in-network care.

The patient’s coinsurance percentage is now 0%, and they are done paying for the year.

Limits

Under the Affordable Care Act (ACA), plans are limited by federally-determined maximum out-of-pocket limits. The exception is any plans that existed before the ACA went into effect or during the transition (called grandfathered or grandmothered plans).

The limit applies to in-network treatment for essential health benefits. However, plans often set out-of-pocket maximums that are lower than the federal cap. For 2022 health plans, the cap is $8,700 for an individual and $17,400 for a family.

How to Calculate Coinsurance

Some aspects of paying for health care are easier to calculate than others. For example, you’ll know how much you have to pay for deductibles and copays because they are fixed amounts set by your insurance plan.

Calculating a health insurance coinsurance amount is harder because coinsurance is a percentage of the total cost of service rather than a set amount. That means the amount of coinsurance can be different for each service you get.

If a service does not cost that much, then the coinsurance amount will be small. However, if the healthcare service was expensive, the coinsurance will be higher, too.

What’s key to remember is the out-of-pocket maximum on your plan. If your policy includes 20% coinsurance, that does not mean you pay 20% of all your health care costs during the year.

Once your spending hits your out-of-pocket maximum for the year, you’re done paying as long as the care you get is in-network and you follow the other rules your insurance provider has, like preauthorization requirements.

(As discussed in more detail below, Original Medicare does not have a cap on out-of-pocket costs. So under Medicare Part B— which covers outpatient care and has a 20% coinsurance—there is no limit to how high a person’s coinsurance charges can be. This is why most Medicare beneficiaries either have supplemental coverage—from Medigap, an employer/retiree plan, or Medicaid—or Medicare Advantage coverage, which does have a cap on out-of-pocket costs.)

Real-World Example

Let’s say that you have a health insurance plan with these features:

• Annual deductible: $1,500
• Coinsurance: 20% coinsurance
• Out-of-pocket maximum: $3,000

In February, you cut your finger and need stitches. The approved amount for the care based on your policy’s network negotiated rates is $2,400.

You have to pay the first $1,500 because that’s your deductible. That leaves a $900 bill. You’ll have to pay 20% of that amount in coinsurance, which is $180.

That means you’ll pay a total of $1,680 for the stitches, and your insurance policy will pay $720.

In July, you have surgery to remove your gallbladder. The procedure will cost $16,000, after your health plan’s network negotiated discount. You have already met your deductible for the year, so you will only have to pay coinsurance (20% of the cost).

You might think your coinsurance responsibility would be $3,200 because that’s 20% of $16,000.

However, you will not have to pay the full $3,200 because your plan has a maximum out-of-pocket of $3,000 for the whole year.

You already paid $1,680 when you had stitches. When you subtract that amount from your out-of-pocket maximum ($3,000) you’ll get $1,320. That’s how much you will have to pay for your surgery.

Your insurance will pay the rest ($14,680) and will now cover 100% of your approved claims for the rest of the year.

What About Medicare?

The ACA put rules in place that limited maximum out-of-pocket costs on all non-grandfathered health plans. Rules that came later also allowed grandmothered plans to stay in use and not be subject to limits on out-of-pocket maximums.

The exception is Medicare, which is not subject to the ACA’s rules for out-of-pocket limits.

Medicare on its own—without a Medigap plan, a supplemental employer-sponsored plan, or additional coverage from Medicaid—does not have a cap on out-of-pocket costs.

Medicare Part B covers outpatient care, which can include ongoing, high-cost health care services such as dialysis. The plan has a small deductible that must be met ($233 as of 2022). After that, a patient pays 20% coinsurance and there is no limit on how high the bill can get.

Without supplemental coverage, coinsurance can add up to high out-of-pocket costs. That’s why most Medicare beneficiaries have supplemental coverage or Medicare Advantage, which has a cap on out-of-pocket costs.

Medicare Part A has a per-benefit-period deductible that will cover 60 days in the hospital. After that time is up, a patient has to start paying part of the bill—and there’s no cap on how high the patient’s out-of-pocket costs can get.

Unless you also have supplemental coverage in addition to Medicare, the out-of-pocket charges you’ll have to pay could get very high if you have a long hospital stay.

Summary

Coinsurance is a type of cost-sharing where you and your health insurance provider both pay a percentage of a medical bill.

You will have to pay costs for health care services you receive until you meet your deductible. Then, your insurance plan will start covering their percentage in coinsurance and you will pay yours.

Once you pay the amount of your out-of-pocket maximum—which includes deductibles, copays, and coinsurance—your insurance provider will cover all the costs for approved services until the end of the year.

People who have Medicare have different rules around coinsurance and out-of-pocket costs. If they don’t have supplemental coverage, their costs for care can be very high.

A Word From Verywell

Although your health plan likely has a coinsurance of 10% to 40%, you almost certainly also have a cap on how high your total out-of-pocket costs (including coinsurance) can be. Knowing exactly how much you’ll owe in coinsurance for a specific medical procedure can be difficult, since it depends on the rate that your health plan has negotiated with the doctor or hospital for that service.

But the billing office should be able to help you estimate it, and you can rest assured that your total costs will not exceed your annual maximum out-of-pocket limit, as long as you stay in-network and get any prior authorization required by your health plan.