Deductibles, copayments and co-insurance are all examples of cost sharing plans. Cost sharing of medical expenses is the situation where an individual and their medical insurance company both pay a specific portion of the medical fees that the insured person accrues. Understanding how these cost-sharing plans work allows individuals to know how much as well as when you have to pay for medical care.
The term coinsurance is not only used in medical insurance, it also exists in other types of plans such as property insurance. Co-insurance is sometimes referred to as percentage participation. The basic concept behind this insurance plan is that the insurer (company) and the insured (individual) share the risks in terms of costs, of all medical visits to a hospital. In the context of health insurance where this plan is most common, this usually means that you will pay a certain percentage of the medical fees then the insurance company steps in and pays the rest. The amount payable in terms of percentage depends on the type of plan you choose as well as the insurance company that you are insured with. Additionally, in other cases, you might not be required to pay any amount as coinsurance.
Before you can fully understand how co insurance works and maybe save money using the different plans, you will need to know the other cost sharing plans, that is, co-payments and deductibles. Co-payments are normally confused with co-insurance but they do not mean the same thing. A co-payment is usually a fixed amount that you are expected to pay each time you visit a doctor regardless of the reasons for those visits. It is not calculated as a percentage of the medical fees like co-insurance. Depending on your medical insurance plan, you may be required to make both a co-payment and pay the co-insurance amount for visiting a doctor. Additionally, most co-payment plans do not qualify for an out-of-pocket expenses cap that allows an individual to stop paying co-insurance when they reach a certain limit. These caps are usually calculated as a total of all the co-insurance and deductible payments an individual has made. After reaching the maximum out-of-pocket expense limit, the health insurance covers the total amount of the medical expenses until you meet the lifetime cap. The lifetime cap is basically the amount of money the insurance company is willing to spend for your healthcare needs in your lifetime.
On the other hand, a deductible is simply the amount of money that an individual must pay before the insurance company steps in and takes care of the rest. Note that the benefits provided by the insurance company only kick in after you have cleared this amount. The Affordable Care Act also known as ACA or Obamacare requires that all major medical health insurance plans to have a maximum out-of-pocket amount of less than $6, 750 for all beneficiaries for 2015. Additionally, all major medical insurance plans must provide a maximum of $12, 700 out-of-pocket amount for every family.