So what is coinsurance? It is the percentage of costs that you are responsible for paying after you have met your deductible.
What is Coinsurance?
Let’s get to know how coinsurance works, and how it can impact your out-of-pocket costs. We’ll also provide tips for how to lower your coinsurance costs and protect yourself from high medical expenses.
So we have already established that your coinsurance is what you must pay after meeting the deductible, before hitting the maximum out-of-pocket amount that you can be charged yearly.
For instance, if your health plan has a coinsurance rate of 20%, and the total cost for a covered healthcare service is $100, you will pay $20 out of pocket, while your insurance covers the remaining $80, provided your deductible has been met.
If your deductible has not been met you are required to cover the full cost.
Example of How Coinsurance Works:
Let’s say the following amounts apply to your plan and you need a lot of treatment for a serious condition. Allowable costs are $15,000.
- Deductible: $4,000
- Coinsurance: 20%
- Out-of-pocket maximum: $7,500
You’d pay all of the first $4,000 (your deductible).
You’ll pay 20% of the remaining $11,000, or $2,200 (your coinsurance).
So your total out-of-pocket costs would be $6,200—your $4,000 deductible plus your $2,200 coinsurance.
If your total out-of-pocket costs reach $7,500, you’d pay only that amount, including your deductible and coinsurance. The insurance company would pay for all covered services for the rest of your plan year.
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Affordable Care Act-Qualified Plans and Coinsurance
The metal tiers under the Affordable Care Act (“Obamacare”) categorize health insurance plans into four levels: Bronze, Silver, Gold, and Platinum.
These tiers are designed to help people understand the balance between monthly premiums and out-of-pocket costs, including deductibles, copayments, and coinsurance.
Each tier represents a general level of costs that you can expect to pay, with Bronze plans having the lowest premium and highest out-of-pocket costs, and Platinum plans having the highest premiums and lowest out-of-pocket costs.
Coinsurance and the Metal Tiers
- Bronze Plans: Typically, these plans have the lowest monthly premiums but the highest coinsurance rates. After meeting a high deductible, you might be responsible for 40% of healthcare costs as coinsurance, while the plan covers 60%.
- Silver Plans: These plans offer a moderate monthly premium and moderate coinsurance rates. For instance, you might pay 30% of healthcare costs as coinsurance after your deductible, with the plan covering the remaining 70%.
- Gold Plans: Gold plans have higher monthly premiums and lower coinsurance rates compared to Silver. After meeting a lower deductible, your coinsurance might be 20%, with the plan covering 80% of the costs.
- Platinum Plans: These plans have the highest monthly premiums and the lowest coinsurance rates. After a very low deductible, or perhaps no deductible at all, you might only pay 10% as coinsurance, with the plan covering 90%.
Defend Against High Out of Pocket Costs
To defend against steep out-of-pocket expenses, consider the following strategies:
- Select the Appropriate Metal Tier: Evaluate your healthcare needs to decide whether a plan with a higher premium but lower coinsurance makes financial sense based on your medical services usage. If you rarely need medical care, a Bronze tier may be the best plan for you. You have to pick up 60% of the costs after you meet your deductible. But these costs are capped, limiting your losses. Meanwhile, you pay a much lower monthly premium compared to the higher metal tiers. On the other hand, if you need to see your doctor a lot, or need a lot of medical care, a higher tier plan such as gold or platinum may be your best bet: you pay a higher monthly premium. But the plan picks up a much bigger percentage of your costs, up to the annual cap. So your monthly costs are much more consistent and predictable. If you qualify for cost-sharing subsidies because your income is below 250% of the federal poverty level, you’ll want to choose a Silver plan, as that is the only plan that comes with these subsidies.
- Use Health Savings Accounts (HSAs): HSAs allow you to set aside money on a pre-tax basis to pay for qualified medical expenses, including coinsurance. These accounts are especially beneficial as they offer tax advantages, and funds roll over year to year if you don’t spend them.
HSAs and Coinsurance
HSAs offer a tax-efficient way to cover coinsurance and other qualified healthcare costs.
Contributions to an HSA are tax-deductible, the account’s growth is tax-free, and withdrawals for qualified medical expenses, including coinsurance payments, are also tax-free.
HSAs can be a tremendous asset in helping you pay for coinsurance costs, copays, deductibles, and anything else your primary medical plan doesn’t cover.
Do Health Sharing Plans Charge Coinsurance?
Health-sharing plans do not have coinsurance—and members like it that way.
These plans, often based on a shared community or religious group, operate by pooling members’ contributions to cover eligible medical expenses.
Members typically pay a predefined “sharing amount” before benefits kick in, which is like a deductible but without the subsequent coinsurance payments you’d see in a traditional insurance plan.
With most plans, the health sharing community will share 100% of eligible costs once you meet your initial member responsibility amount (MRA).
A few plans have an option for you to retain some of that risk in the form of additional MRA. This functions similarly to coinsurance with traditional health insurance products.
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How Additional MRA Works
Example: With JHS Community’s DIVERSE plan tier – an excellent, low-cost health share plan focused on catastrophic healthcare needs, you can choose an initial MRA of $2,500, $5,000, or $10,000 per per member for up to three members.
Once you’ve satisfied your initial MRA, the plan will pick up 80% of the next $10,000 in medical expenses per member – again, for up to three members.
This additional out-of-pocket charge is called additional MRA. It serves an analogous function to coinsurance in a traditional health insurance product, similar to a Gold tier Marketplace plan.
When you agree to take on the risk of additional MRA, you essentially “buy” a lower monthly rate. You’re making a bet that you won’t need that much healthcare during the plan year. If you’re right, you keep the savings. If you’re wrong and you or your family members end up needing care, you still get the lower monthly rate, but you may pay an additional MRA.
JHS Community Healthshare’s DYNAMIC plan has no additional MRA. It shares 100% of medical costs once you satisfy your initial MRA.
As you might guess, all other things being equal, DYNAMIC has higher monthly costs than DIVERSE. But you also retain less risk. Your out-of-pocket exposure is limited to your MRA and some copays for specific services.
You might want to consider a health share plan with additional MRA if you are in good health, and you can afford to take on a little extra risk in the event you need care, and you want a lower monthly cost.
By choosing the right plan, leveraging HSAs, and considering alternative options like health-sharing plans, you can effectively manage your healthcare expenses and minimize out-of-pocket costs. Got questions or need to explore your options?
It’s simple.
Book a free consultation with an HSA for America Personal Benefits Manager.
For Further Reading: Can I use an HSA for Counseling or Therapy | Unlock the Power of Your HSA: Pay for a Chiropractor & Chiropractic Care From Your HSA Account | High Deductible Plans Are Actually Good!
