How does Coinsurance work?

 

Navigating your medical insurance benefits can be complicated.  While most people understand how a deductible and copays work, not everyone understands what coinsurance is and how it works. 

Coinsurance is a cost-sharing arrangement between you, the member, and your insurance carrier.  Coinsurance activates after you have met your deductible and typically stays in effect until you reach your Out-of-Pocket Maximum. 

Example

You receive a hip replacement on January 1^st.  You have not used your medical plan for the current plan year and your deductible is $3,000, your Coinsurance is 70%, and your Out-of-Pocket Maximum is $6,000.  Your provider bills your insurance for $80,000 and your insurance carrier’s allowed amount is $30,000.  Here is how your benefits will work:

1.      Provider sends bill to your insurance carrier for $80,000

2.      Insurance carrier adjusts bill down to $30,000 (called Allowed Amount) based on negotiated rate between the carrier and provider.

3.      You will be charge your $3,000 deductible, payable to your provider.  

4.      The remaining $27,000 falls into coinsurance until you hit your Out-of-Pocket Maximum of $6,000.  So, the insurance carrier will pay 70% of the costs until you have paid out another $3,000 in costs beyond your deductible.  After you hit your $6,000, the carrier pays 100%.