Okay, we’re going to interrupt Mary and Billy’s journey to the Maximum Out of Pocket for a brief side trip through coinsurance and copays. Don’t worry – we’ll get there!
A coinsurance is simply a set percentage of the allowable that you pay.
All done – we now rejoin… wait, you didn’t get that?
Don’t feel bad – few people do.
Allowable: it’s the amount of money the insurance company will actually pay for a given service. This is something the insurance companies and the medical providers decide in advance.
Say your doctor charges $200 for an office visit when there is no insurance involved. But your doctor has an agreement with your insurance company that he will accept $75 for the same office visit instead. $75 is the allowable.
You don’t have to understand the particulars of billing – your doctor’s poor billing clerk has that covered. But in this case the allowable affects how much you actually pay.
A coinsurance is a set percentage of the amount being billed that you have to pay. The amount billed is only $75 and not the doctor’s usual and customary (normal) $200.
So, if you are paying a coinsurance, you pay a percentage of the allowable – in this case, you pay part of $75 instead of part of $200.
But you just want to know how much your paying – how can you tell?
Now you need to know what your particular coinsurance is. In other words, what is the set percentage you are responsible for? That’s easier than it sounds – in most cases, the amount is in the name of your plan. If not, it IS in the Summary of Benefits your insurance company sent you – so dig it back out of the drawer!
Mary has the ABC 2500/20. The numbers are just deductible/coinsurance – so her deductible is $2500 and her coinsurance for most things* is 20 %.
So, when Mary goes to her doctor and pays a coinsurance, how much does Mary pay? The answer is $15 – which is 20 % of $75! If the allowable were $200 instead, Mary would pay $40 – again, 20 % of the allowable, $200.
But the allowable is $75 so Mary pays $15.
Okay, tricky part – when a plan indicates a coinsurance remember that the percentage indicated is the amount you will pay. This is REALLY important!
Remember, the doctor agreed to accept $75, not $15 – so he is still owed $60. That $60 – the remaining 80 % – comes from the insurance company. When Mary leaves, the nice billing clerk will send a claim (bill) to the insurance company for the balance so that the doctor gets paid the full $75 he agreed to accept.
But getting the doctor paid is only half the battle here – it’s critical that you understand what your coinsurance does – and that the percentage is ALWAYS what YOU pay.
Why? Because not all coinsurances are 20%. Coinsurance can be a much higher percentage for you to pay – and an error reading the percentages in the enrollment phase can REALLY cost you.
Here’s what coinsurances look like – at least to your pocketbook!
First off, remember that the TOTAL ALLOWABLE must be paid – after all, the doctor, hospital, drug store, therapist and all their kin are doing you and your insurance company a favor by accepting less than the usual and customary – the least we can do is make sure they get all of what they agreed to accept.
So, from here out, total medical costs is equal to the total allowable – because that’s the amount actually being paid.
100 % of the costs:
Okay, so what happens if you have a 10% coinsurance? 20 %? What happens is you pay the percentage mentioned and the insurance company pays the percentage that remains of the total:
10 % Coinsurance
10 % + 90 % = 100 % !
20 % Coinsurance
30 % Coinsurance
40 % Coinsurance
50 % Coinsurance
Okay, so 50 % coinsurance means you pay half and the insurance company pays the other half. What happens if the coinsurance is more than 50 %?
60 % Coinsurance
70 % Coinsurance
OUCH! You’re paying a larger percentage of the cost than your insurance company is!
Now, before you panic, such large coinsurance percentages are more common in dental plans than health plans – but THIS is why you MUST read the details before you buy the plan! 40 and 50 percent coinsurances are very real possibilities – especially if your are buying a low actuarial value plan (fancy for the company pays a lower percentage over all) like a Bronze level plan.
High coinsurances bring down the monthly premium – this means they aren’t necessarily bad things but when you are balancing your monthly premium versus what you can actually afford if you do get sick, it’s critical to understand what your coinsurance is and how the pesky thing works. There will be a test – make sure your pocketbook can pass!
*Plans can contain different coinsurances for different services – especially expensive services. Keep that Summary of Benefits – it will tell you if there are any such surprises in your plan!