on Health Insurance and market trends
April 13, 2023
Insurance Companies usually use terms that you are not familiar with and one of these terms is Co-insurance.
Coinsurance is basically sharing costs between insurance companies and you. There are different packages available but the most common one is 80% / 20% where 80% of your costs are paid by insurance and the rest 20% will be paid by you.
What is Coinsurance and how does it work? The common question that we are being asked and to counter this we are going to explain about the mechanism of co-insurance and terms related to it.
You have basically got an idea what exactly co-insurance is but along with this you need to know how it works. Here is something you need to know.
Insurance system has 3 levels:
Finding these definitions a little confusing, don’t worry let us explain you through a detailed example which is our favorite part as we believe that this will help you.
Scenario 1: Assume that your Deductible amount is $1800 according to insurance health policy
This is Level 1 where you will pay the whole amount of your medical expense.
Reason: Your Medical expense is lower than your Deductible Limit.
Scenario 2: Now assume that your deductible amount was $1200
This is Level 2 where you have entered the sharing pay which is Coinsurance.
Reason: Being in the Co-insurance phase your amount will now be shared between you and your insurance company ( mostly done by using 80% / 20% rule where your insurance pays 80% and the rest 20% will be paid by you.
Scenario 3: In this case your Medical Expense is $3000 and your Out of Pocket Maximum amount is $2500.
This is Level 3 where you have entered the “They Pay” phase, now you are 100% insured.
Reason: The third variable “Out of Pocket Maximum” is a fixed amount similar to deductible but showcases the maximum amount you will pay, if your medical bill has crossed this limit then you are 100% insured.
Important Note: Out of Pocket Maximum is calculated by adding Deductible + Co insurance and if the limit crosses of OPM (Out of Pocket Maximum) then also you are eligible for 100% insurance.
Copay doesn’t depend on deductible for instance your copay is $50. This amount will be paid whenever you visit your doctor but Coinsurance on the other hand will be applicable only when you have met your deductibles.
Afterwards, a percentage for instance 80% will be paid by insurance and the rest 20% will be paid by you.