What You Need to Know About Coinsurance

Why You Might Still Owe Even After Meeting Your Healthcare Deductible

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Coinsurance is a type of cost-sharing in which the patient pays a percentage of the medical bill and their insurer pays a percentage.

What Is Coinsurance?

Most health insurance policies require that a patient pay a percentage of the cost of covered health-related services after the annual deductible has been met. This is coinsurance. Coinsurance often amounts to about 20% to 30% of what the health plan approves. The health plan will then pay the remaining 70% to 80%. The coinsurance percentage is typically applied in addition to the deductible, which needs to be paid prior to the insurance company paying anything out on their end. Only after the deductible is paid in full will you be sharing the cost of your care with your health plan by paying coinsurance (this does not apply to services that are either covered in full without a deductible—including certain preventive care—or to services that are covered with a copay—such as doctor visits on many plans—instead of coinsurance).

Out-of-Pocket Maximum

Coinsurance is applied toward a patient’s annual out-of-pocket maximum. The yearly out-of-pocket maximum is the most the health insurance company can require a patient to pay in cost-sharing (deductible, copays, and coinsurance) during the course of the year.

Under the Affordable Care Act, all plans that aren't grandfathered or grandmothered are limited by federally-determined maximum out-of-pocket limits—applicable to in-network treatment for essential health benefits—although plans often set out-of-pocket maximums that are lower than the federal cap (for 2020 health plans, the cap is $8,150 for an individual and $16,300 for a family).

Once a patient’s deductibles, copayments, and coinsurance paid for a particular year add up to the out-of-pocket maximum, the patient’s cost-sharing requirements are then finished for that particular year. Following the fulfillment of the out-of-pocket maximum, the health plan then picks up all of the cost of covered in-network care for the remainder of the year—which means the patient's coinsurance percentage drops to 0%.

Here is an example of how coinsurance works:

Shawn has a health plan with a $1,500 annual deductible and 20% coinsurance up to a maximum out-of-pocket of $3,000. In February, Shawn needs stitches in his finger and the approved amount based on his policy's network negotiated rates is $2,400. Shawn has to pay the first $1,500 (his deductible) and then he'll pay 20% of the remaining $900 bill, which comes out to $180. That means he'll pay a total of $1,680 for the stitches, and his insurance policy will pay $720.

Then in July, Shawn ends up needing knee surgery and the network negotiated cost for the procedure is $16,000. Shawn has already met his deductible for the year, so he only has to pay coinsurance. Twenty percent of $16,000 is $3,200, but Shawn doesn't have to pay all of that because his plan has a maximum out-of-pocket of $3,000 for the year. He's already paid $1,680 for the stitches, so he only has to pay another $1,320 for the knee surgery (the difference between $3,000 and the $1,680 he already paid). After that, his insurance will start to cover 100% of his approved claims for the rest of the year. So for the knee surgery, Shawn pays $1,320 and his insurance pays $14,680.

Calculating Your Health Insurance Coinsurance

Deductibles and copayments are fixed amounts of money. Thus, it is not very difficult to figure out how much is owed. A $50 copayment for a prescription will cost $50 no matter how much the drug costs (most health plans divide drugs into different tiers, with higher-cost drugs having higher copays, and the highest-cost drugs are often covered with coinsurance instead of a copay).

But calculating a health insurance coinsurance amoung is a bit more complicated, as coinsurance is a percentage of the total cost of service, rather than a set amount. Thus, coinsurance will be different with each individual service received. If the health care service received is relatively cheap, then the coinsurance amount will be relatively small as well. However, if the health care service received was expensive, the coinsurance will end up being expensive as well.

But as noted in the example above, the out-of-pocket maximum on the plan is the limiting factor. If your policy includes 20% coinsurance, that doesn't mean you pay 20% of all your costs during the year—once your spending hits the out-of-pocket maximum for the year, you don't have to pay any more (as long as you remain in-network and comply with things like preauthorization requirements).

Medicare Part B coinsurance: An exception to the maximum out-of-pocket rule

The Affordable Care Act implemented rules that limit maximum out-of-pocket on all non-grandfathered health plans (and subsequent regulations allowed grandmothered plans to remain in force; grandmothered plans are not subject to the law's limits on out-of-pocket maximums either).

But Medicare is not subject to the ACA's rules for out-of-pocket limits. And Original Medicare on its own (without a Medigap plan, supplemental employer-sponsored plan, or additional coverage from Medicaid) does not have any cap on out-of-pocket costs.

Medicare Part B has a small deductible and then 20% coinsurance with no limit on how high the bill can get. Part B covers outpatient care, but that includes some ongoing, high-cost services such as dialysis. Most Medicare beneficiaries have supplemental coverage (or Medicare Advantage, which has a cap on out-of-pocket costs). But without supplemental coverage, coinsurance can add up to a significant amount in out-of-pocket costs.

Medicare Part A has a per-benefit-period deductible that covers 60 days in the hospital, but then the 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 (incidentally, Medicare refers to the patient's per-day hospital cost as "coinsurance" but it's a flat amount—more like a copay—rather than a percentage of the total bill). As is the case with Part B, out-of-pocket charges can become unmanageable in the event of a long hospital stay, unless the patient has supplemental coverage in addition to Medicare.

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Article Sources

  1. Federal Register. Department of Health and Human Services. Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2020. April 25, 2019.


  2. Cubanski, Juliette; Damico, Anthony; Neuman, Tricia; Jacobson, Gretchen. Kaiser Family Foundation. Sources of Supplemental Coverage Among Medicare Beneficiaries in 2016. Nov 28, 2018


  3. Medicare.gov. Medicare costs at a glance.


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