Coinsurance refers to the percentage you pay for a healthcare service after you’ve met your deductible. Health insurance can be a confusing process to navigate, so it’s imperative that you have a healthy understanding of your insurance policy and coverage. We’ll cover the meaning of coinsurance, how it works, and how it applies to your health insurance policy.

How does coinsurance work?

Coinsurance, meaning the percentage of the bill for covered health care services that you pay after you’ve met your annual deductible, is an integral part of your healthcare plan.

Your policy should show you your coinsurance percentage as a fraction, like 80/20. This means that your insurer will cover 80% of your costs after you meet your deductible, leaving you responsible for the remaining 20%.

For example, say your deductible coinsurance percentage is 20% and your insurance plan’s eligible amount for a walk-in clinic is $100. If you have met your deductible, your insurance will pay $80, and you’ll need to pay $20. If you haven’t met your deductible, you’ll need to pay the full $100.

Coinsurance vs. copayment

A copayment, also known as a copay, refers to the fixed amount charged for a particular service, such as a doctor’s appointment or prescription medication. Instead of a percentage charged through coinsurance, a copayment is a flat rate.

Whether you are charged a copayment or coinsurance for a given service depends on the details of your plan. Smaller, routine costs like doctor’s visits and prescriptions often use copayments, while more significant expenses, like emergency surgery, typically utilize coinsurance.

When do you need coinsurance?

Coinsurance can help you cover the cost of healthcare expenses. While coinsurance only kicks in after you’ve met your deductible, it can help to defray the cost of pricey medical bills. A health insurance policy will usually include coinsurance. However, policies can vary both when it comes to the deductible and the coinsurance percentage.

How do you calculate coinsurance costs?

How you calculate coinsurance costs depends on how much of your deductible you’ve already used in a given year. For example, if your deductible is $1,000, and you only have $800 worth of medical expenses in a given year, coinsurance won’t kick in. But if you have $2,000 of medical expenses and an 80/20 coinsurance percentage, then you’ll pay $1,200, and your insurance will pay $800.

If you’re on a budget, it’s a good idea to weigh the pros and cons of plans with generous coinsurance. Plans with high coinsurance rates tend to have lower monthly premiums, while plans with low coinsurance rates have higher monthly premiums. Which one is best for you depends on your health, budget, and risk appetite.

Other health insurance terminology you should know

Health insurance terminology can get confusing. Here are some of the terms associated with health insurance that you should know:

  • Deductible – The threshold of money you must pay for any medical expenses before your insurer starts subsidizing you.
  • Out-of-pocket maximum – This refers to the maximum amount you’ll have to pay for covered services in a given year. It includes your deductible, coinsurance and copayments, but does not include your insurance premium. Your health insurance company pays all additional medical expenses once you have paid your out-of-pocket maximum in a policy year.
  • Premium – A premium is the cost of your insurance policy. It does not go towards your deductible or your out-of-pocket maximum.
  • Eligible amount – The maximum amount a plan will cover for a specific type of medical or dental service. It’s also referred to as an allowable amount, payment allowance, or negotiated rate.

Making worthwhile investments

Insurance is a good investment that can help you access the healthcare you need. Business health is a lot like your personal health: Things can take a turn at any time, and it’s best to have safeguards in place. Business insurance helps protect and secure your company’s financial wellness.

Thimble lets you pay for a business insurance policy only when you need it (which may not sound revolutionary, but it is). Thimble’s small business insurance helps you find a policy tailored to your needs by the job, month, or year. You can receive a quote and get coverage from anywhere you are in minutes. Go from zero defense against liability to having a Certificate of Insurance (COI) on hand for whatever life throws your way.