Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Nov 13, 2020

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The least you should know…

  • Healthcare coinsurance is a method of dividing costs between you and your health insurance provider
  • Coinsurance healthcare kicks in after you have met your deductible and paid your copay
  • Typically the terms of your coinsurance will require you to pay a higher percentage of the balance of healthcare treatment for out of network providers
  • Some health coinsurance policies will provide for the insurance company to pay 100 percent of the remaining costs of treatment after if your claim is properly made and the treatment was in network

There are many hoops you have to jump through before your insurance policy actually kicks in and starts paying benefits, including co-pays, deductibles, and pre-certifications. In addition to these, another limitation to health benefits is coinsurance.

Healthcare coinsurance is a provision under which the insurance provider and the insured person share costs incurred after the co-pays and deductibles are met, according to a specific formula or schedule.

This article will explain coinsurance benefits, claim procedures, and limitations. If you have a dispute with your insurance provider, an experienced insurance lawyer can be indispensable. To begin your search for a health insurance attorney near you, you can enter your ZIP code into our search tool.

Health Coinsurance Explained

Healthcare coinsurance’s meaning is best understood as a division of cost for healthcare with your insurer. 

Once you have incurred sufficient out of pocket expenses to meet all your necessary co-pay and deductible limits, then the insurance company will begin applying their policy benefit formula to the remaining expenses you have incurred. This means they still will not be paying for everything.

This health coinsurance formula is often referred to as the Company Insurance Percentage. The company insurance percentage is defined as the portion of covered expenses the insurance company will pay to, or on behalf of, an insured after the insured has assumed financial responsibility for three things:

  1. all co-pays that apply;
  2. all deductibles that apply;
  3. the amount of the insured coinsurance percentage that applies.

The “Insured Coinsurance Percentage” is the portion of the covered expenses that you are responsible for paying after co-pays and the deductibles are met. This is a percentage that is shown on the policy schedule, and, together with the company insurance percentage, they total 100 percent.

The percentage is usually displayed in your policy as “80/20”, “75/25”, “70/30” “50/50”. Some policies have no coinsurance provision.

Here’s a healthcare coinsurance example:

If you have incurred inpatient hospital expenses that exceed your co-pay and deductible obligations by $20,000 and your insured coinsurance percentage is 30 percent, then you will be obligated to pay, in addition to your co-pay and deductible amounts, $6,000 (30 percent of $20,000). The insurance company will be obligated to pay the remaining $14,000 (70 percent, the company insurance percentage).

So a 30 percent coinsurance means that you would be responsible for 30 percent of the amount owed after all other insurance is applied, just as 70 percent coinsurance means that you would be responsible for 70 percent of the remaining amount owed.

In order to determine the cost of your health coinsurance with a calculator, simply determine the total cost of the healthcare and multiply by your coinsurance percent (0.30 for 30 percent, for example).

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Coinsurance Payment Schedules: Participating and Non-participating Providers

Look at the policy schedule for the breakdown on the percentages paid to doctors “inside your plan” (called participating providers) and those “outside the plan” (called non-participating providers) or not on the list of participating providers.

Here’s what your policy schedule might look like:

COINSURANCE PAYMENTS SCHEDULE PARTICIPATING PROVIDERS
A. Company Insurance Percentage 100%
B. Insured Coinsurance Percentage 0%

A “Participating Provider” is a hospital, doctor, surgery center, skilled nursing home, or other licensed practitioner that has entered into an agreement with the insurance company to provide you with services at a discounted rate.

COINSURANCE PAYMENTS SCHEDULE NON-PARTICIPATING PROVIDERS
A. Company Insurance Percentage 70%
B. Insured Coinsurance Percentage 30%.

A “Non-Participating Provider” is also a hospital, doctor, surgery center, skilled nursing home, or other licensed practitioner, but one which has not entered into an agreement with the insurance company to provide health care services to you under the policy at discounted rates.

The co-insurance percentages differ depending on whether your provider is listed in the network or works outside the network. In our sample policy, the health services were done by a doctor “inside the network” and hence the insured coinsurance percentage is 0%. In other words, you are not obligated to pay anything (after the co-pays and deductibles). The insurance company picks up the entire bill for the expenses for the services provided.

On the other hand, if your medical treatment is performed by an out-of-network doctor or other provider, under our sample policy you would be responsible for paying 30% of the bill after the copay and deductibles.

That is the insured coinsurance percentage. The insurance company pays 70%, their company insurance percentage. Here is a coinsurance example for how this calculation works:

Let’s suppose you have $10,000 in medical expenses from Dr. Smith, an out-of-network doctor, after the deductibles and co-pay. Of this bill, you would pay $3,000 (30%) and the insurance company would pay $7,000 (70%). This is true even for pre-certified treatment, i.e., a treatment approved in advance by the insurer.

So, it is important, where possible, for you to make certain your treatment and services are being performed by doctors and facilities in the insurance company’s network (i.e., the participating providers). Note, however, that even if your provider is in your insurance company’s network, some policies still require you to pay a small (or sometimes not so small) coinsurance percentage. Check your own policy to be sure.

Relationship with co-pays and deductibles

The participating/non-participating division also rears its ugly head in the area of co-pays and deductibles.

The terminology can get confusing, but coinsurance vs. copay is fairly straightforward.

If, for example, you have elected our sample policy with a $2,500 co-pay for hospital stays, that is the co-pay that applies to participating provider treatment and services, i.e., treatment by doctors, hospitals, etc., in the insurance company’s network.

If treatment is performed by non-participating providers, i.e., those outside the network, the sample policy requires a higher co-pay of $3,250 before the insurance company will pay any benefits.

The distinction is even greater with deductibles.

What is a deductible in health insurance? An example is explained below. Basically, the deductible is your annual out of pocket maximum, the amount you have to pay each year before your insurance will start to cover costs.

If you have elected a $5,000 calendar year deductible, which would apply to participating providers, you are subject to an additional $6,500 deductible for treatment performed by non-participating providers. These are two more reasons to make sure whenever possible that your treatment and services are provided by doctors and facilities in your insurance company’s network.

Do you have to pay health insurance deductible upfront? Although the deductible will have to be covered before your insurer will pay, this will often be billed to you after service is provided. You may be expected to pay any copay upfront, however.

Depending on your coinsurance, after the deductible and copay are met, the coinsurance will determine what percentage of the remaining balance you are responsible for.

The Last Word

So is it better to have a copay or coinsurance or a deductible? If you only had one of these, you would rather have zero copay and zero deductible and 100 percent coinsurance. A copay and a deductible are amounts you have to pay before your insurance kicks in while coinsurance is the amount your insurance will pay beyond whatever is covered.

So have we helped explain what health coinsurace means? Do you have a better understanding of the benefits and claim procedures involved in coinsurance benefits?

If you have further questions, contacting your insurance agent should clarify this complicated issue. Should you have a conflict with your insurer that may require a lawsuit, you can search for an experienced health insurance lawyer with our tool below.