What Is Coinsurance, and How Does It Work?
Key takeaways:
After you meet your annual health insurance deductible, you share medical costs with your insurer until the end of the plan year. Your percentage of those costs is called coinsurance.
Your coinsurance may be high (80% to 100%) or low (0% to 20%). Typically, it is less than 50%.
Your coinsurance drops to 0% once you reach your out-of-pocket maximum for the year.
Table of contents
When you’re choosing an insurance plan, one important step is to estimate your medical costs for the following year. In addition to your policy’s monthly premium, you’ll be responsible for coinsurance or a copay for the care you receive. Copay amounts are specified in policy documents, so you know what to expect. Your coinsurance bill can be trickier because many factors affect the total. Understanding how coinsurance works and how it affects your out-of-pocket costs can make a big difference in your budget.
What is coinsurance?
Coinsurance is a way for your insurer to share medical costs with you after you’ve met your deductible. It requires you to pay a portion of your medical costs (such as charges for tests and office visit fees), while your insurer pays the rest.
How does coinsurance work?
Your portion is expressed as a percentage. For example, if you have 20% coinsurance (common for employer-sponsored health insurance), then you pay 20% of medical costs after meeting your deductible; your insurer pays 80%.
Prescription Savings Are Just the Beginning
See what other benefits you qualify for—from cashback cards to cheaper insurance.
To calculate your financial responsibility, multiply the healthcare cost by your coinsurance rate. Here’s an example with 20% coinsurance:
An office visit is $100.
You pay $20.
Your insurer pays $80.
When do I pay coinsurance?
You pay coinsurance only after meeting your deductible. For example, if your annual health insurance deductible is $5,000 and you had surgery in March that costs $3,000, you would have to pay that entire amount and have a $2,000 balance left on your deductible. Then you have another procedure in September that costs $4,000. Your coinsurance of 20% will be $400, and your insurer will pay $1,600.
Coinsurance vs. copay
Coinsurance and copays both refer to the out-of-pocket expenses you pay for healthcare services, but they are not the same. Coinsurance is a percentage of the cost you’ll pay for a service, and copays are fixed fees for specific healthcare services.
Coinsurance vs. deductible
Your health plan will likely have both a deductible and coinsurance. Your annual deductible is an out-of-pocket dollar amount specified in your policy documents. You have to pay that amount in full before your insurer begins covering any costs. Once you’ve paid all of that deductible amount, your coinsurance will kick in. Your insurer will begin paying a percentage of your medical costs as outlined in your plan, until the end of the year. Your deductible resets each year.
It is possible to get zero-deductible health insurance — in which case, your coinsurance would apply immediately. But those plans will often have more expensive premiums. In general, if you have a high-deductible healthcare plan, you’ll pay lower premiums. Coinsurance doesn’t apply until you meet the deductible. It’s not uncommon for high-deductible health plans to have low coinsurance rates.
Read more like this
Explore these related articles, suggested for readers like you.
How does coinsurance affect out-of-pocket costs?
Coinsurance has a significant effect on your medical bills, and the effect can be hard to predict. Since coinsurance operates as a percentage — rather than a fixed cost, such as a copay — the dollar amount you owe for your share will change along with your total medical bill.
But that’s not the only reason your coinsurance burden is unpredictable. There are several other factors to watch for:
Your coinsurance rate may be the same across the board or may be different depending on the service. For example, your plan may charge you:
20% for a visit to your primary care physician
30% for a specialist
40% for an emergency room visit
15% for medication
Your coinsurance percentage will vary based on whether your healthcare professional is in your plan’s network. Health plans usually have different rates for in-network and out-of-network healthcare professionals. Your out-of-network coinsurance rate will be higher.
If you use an out-of-network healthcare professional, you may have to pay an extra charge in addition to your coinsurance. Insurers calculate “usual, customary, and reasonable” (UCR) prices for services in a given location. They pay their share of the coinsurance on the UCR amount, as do you. But if your healthcare professional’s fee is higher than the UCR price, you will probably have to pay 100% of the difference.
All your coinsurance payments count toward your out-of-pocket maximum, which is set by your policy. Once you reach that maximum, you stop paying coinsurance, and your health plan covers 100% of in-network services for the rest of the year.
Medicare Part B coinsurance is usually 20% of the Medicare-approved price.
For employer-provided health insurance plans, the average coinsurance rates in 2023 are 19% for primary care and 20% for specialty care, according to KFF’s annual survey.
For insurance purchased on a state marketplace, coinsurance varies by plan. Here are the average splits:
Metal level | Your coinsurance | Insurer pays |
Bronze | 40% | 60% |
Silver | 30% | 70% |
Gold | 20% | 80% |
Platinum | 10% | 90% |
Coinsurance also applies to prescription medications. With private insurance plans, coinsurance percentages vary by prescription medication tier. In Medicare Part D plans, medication prices, copays, and coinsurance rates may vary by tier, while coinsurance also changes from one phase to another.
What are the financial benefits and risks of coinsurance?
Coinsurance | Financial benefits | Financial risks |
High coinsurance | If you’re comfortable paying a larger share of your medical costs, you can lock in lower premiums. If you do have to pay out, keep in mind that your coinsurance payments count toward your out-of-pocket maximum. This means higher coinsurance costs could help you hit that limit sooner. | People with chronic health conditions who need multiple medications or hospital stays could find a high coinsurance percentage very costly. Even if your premiums are low, those monthly savings vanish when you have to pay a larger share of bills for expensive medical services. |
Low coinsurance | People who need chronic care, expensive treatments, or pricey medications will have an easier time with low coinsurance. Having your insurer paying a larger share of your costs may help you save money over time, even if your monthly premiums are on the high side. | Plans with low coinsurance generally have higher premiums. When you have a plan with a low coinsurance rate, your contribution to your medical bills is smaller, so it takes longer to reach the out-of-pocket maximum. |
The bottom line
Understanding your health plan’s coinsurance can help you estimate your medical costs. Low coinsurance will benefit people needing ongoing care; even if premiums are higher, overall medical bills will be smaller. High coinsurance typically goes with lower premiums, so people who need only routine care will pay less each month and may not face costly bills at all. But if they need expensive care, they owe a larger share of those bills. Once you hit your annual out-of-pocket maximum, you no longer pay coinsurance.
Why trust our experts?
References
Healthcare.gov. (n.d.). Coinsurance.
Healthcare.gov. (n.d.). How to pick a health insurance plan.
Healthcare.gov. (n.d.). Out-of-network coinsurance.
Healthcare.gov. (n.d.). Out-of-pocket maximum/limit.
Healthcare.gov. (n.d.). UCR (usual, customary, and reasonable).
Healthinsurance.org. (n.d.). High-deductible health plan (HDHP).
HealthMarkets Insurance Agency. (2023). What is coinsurance?
KFF. (2023). 2023 employer health benefits survey.
Medicare.gov. (n.d.). Costs.
U.S. Bureau of Labor Statistics. (2023). Table 3. Medical plans: Share of premiums paid by employer and employee for single coverage.
