What is coinsurance and how does it function in a health policy?

• A. Coinsurance is the percentage of covered medical costs the insured pays after the deductible; insurer pays the rest up to limits.
• B. Coinsurance is a fixed monthly fee regardless of service.
• C. Coinsurance is the insurer's guaranteed dividend share to the insured.
• D. Coinsurance is the total premium charged by the insurer.

Answer: (A)

Coinsurance is a cost-sharing feature where you and the insurance plan split the cost of covered medical services after you’ve met your deductible. You pay a percentage of the bill, and the insurer pays the remaining percentage up to the plan’s limits. This shifts part of the financial risk to you while sharing the rest with the insurer.

For example, if your plan has a deductible of $1,000 and a coinsurance of 20%, a covered service costing $5,000 would cost you $1,000 first (your deductible), then 20% of the remaining $4,000, which is $800. The insurer would pay $3,200. Your total out-of-pocket for that service would be $1,800, plus any other applicable costs.

Coinsurance continues to apply until you reach the out-of-pocket maximum, at which point the plan typically pays 100% of covered expenses for the rest of the period. Some services, such as certain preventive care, may be covered with no coinsurance. It’s also common for coinsurance rates to differ for in-network versus out-of-network care and to apply only to covered expenses, not to non-covered services.