Co-Insurance

Co-insurance is a term which describes a system whereby an insured person has to pay a portion of medical costs with the balance being covered by the health policy.

This implies that a claim would only be paidout should the client fulfill his or her required payment as per the agreement in coinsurance.

For example, a policy might require the policy holder to be responsible for 10% of medical expenses. If the amount comes up to $10,000 with a $1,000 deductible, then the amount that the policy holder would have to copay is ($10,000 – $1,000) x 10% = $900.

The total out-of-pocket costs would be $1,000 + $900 = $1900.

This makes it 19% of the total medical expenses which a person has to pay. The remaining 81% ($8,100) would be paid by the insurance company. This does not take into account any claim limits that might be imposed on benefits of a specific policy.

The underlying reason for the implementation of co-insurance is to deter the abuse of the fee-for-service healthcare system.

The more cash which patients have to pay out of their own pockets, the more prudent they would be regarding the choice of treatments to pursue. And the smaller the potential for sales people to drive up prices of services which insurers end up paying for.

But isn’t that what deductibles were supposed to do?

Deductibles vs co-insurance

The easy answer to that question is that it was.

But some time in the past, the experts must have felt that a dual-pronged approach of deductibles plus co-insurance co-payments have the best impact in achieving some sort of balance in this equation.

This is considering that there would always be market forces that try to sway the players in the heatlhcare system one way or another.

Insurers want to generate as much revenue as possible and payout as little benefits as possible to increase profits. Healthcare service providers want to sell as much of the products and services as possible at as high a price as possible to maintain revenue growth. And people want to pay as little premiums as possible and get as much benefits as possible. All these while the government does it’s best to maintain balance by conceptualizing policies.

There are two main differences between deductibles and co-insurance.

The first being that the deductible is a dollar amount that while co-insurance is a percentage.

The second being that the deductible would always come first.

This implies that if medical costs do not exceed the deductible, the patient would pay for everything himself and co-insurance would not kick in.

While the coinsurane amounts that people have to pay are not unaffordable, people can still purchase riders and other cash-payment plans to offset that co-payment if they find it necessary.

However, new policies announced in 2018 phased-out riders that totally remove co-payments. Now riders have a minimum of 5% co-insurance.

People who were still on riders that covers everything would be able to keep their riders as long they continue paying the premiums.

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