Insurance typically pays a major portion of your expenses for covered items like doctor visits and hospital costs. If a particular expense is covered under your policy, in many cases the insurance company still doesn't pay the entire amount. The portion of a covered expense that you have to pay is called the coinsurance.
If you have a policy that covers 80 percent of the amount allowed for a particular expense, such as minor surgery in a doctor's office, you're responsible for the remaining 20 percent. You and the insurance company together pay the entire bill.
For example, if your insurance allows $300 for the procedure, your insurance would pay 80 percent of $300. Multiply $300 by 0.8, and the result is $240. Your expense is 20 percent, so multiply $300 by 0.2. Your cost is $60.
Preferred-provider insurance plans cover a larger percentage of your bill if you use a doctor or provider in their network. For example, your insurance may cover 90 percent of in-network services and only 80 percent of out-of-network services. If the bill is $100, your coinsurance is 10 percent or $10 within your network, and 20 percent or $20 out of network.
Some Americans buy a secondary insurance policy called gap insurance. Depending on the policy, gap insurance pays the coinsurance and may pay deductibles. For example, Medigap insurance pays the coinsurance for Medicare policyholders.
- HealthCare.gov: Coinsurance
- First Financial Group of America: What Is Medical Gap Insurance?
- Medicare.gov: What's Medicare Supplement Insurance (Medigap)?
- Healthcare.gov: Preferred Provider Organization
- Fair Health: In-Network vs. Out-of-Network Care
- U.S. Department of Health and Human Services: Health Insurance Marketplace
- Medicare.gov: Sign Up/Change Plans
- Bankrate.com: Health Insurance