What is coinsurance?

Your guide to understanding coinsurance.

What you need to know

Coinsurance is a percentage of the cost of health services that you pay, usually after you've met your deductible. Coinsurance is one of the costs that make up the total that you'll spend out-of-pocket on health expenses, along with copays, your deductible, and premiums. A common coinsurance split is 80/20, with your health insurance company paying 80% of the cost and you paying 20%.

Let's say you've already met your deductible (or you have a zero deductible plan) and you break your arm. The X-ray costs $400, and your coinsurance is 20%. When it comes time to tally up the bill, you'll owe $80 for that X-ray. Your insurance company will pay the other $320.

Coinsurance, along with copays and the money you spend before you meet your deductible, is limited by the out-of-pocket maximum. For example, let's say you had already met your $7,900 annual out-of-pocket limit before you broke your arm in the example above. Instead of paying for 20% of the cost, you'd pay nothing. Your health insurance company would cover the entire cost of the X-ray.

Because plans with coinsurance usually require that you pay your deductible before splitting the cost with your insurance company, they can be more expensive upfront if you use healthcare services. Consumers with coinsurance plans are more likely to hit their out-of-pocket limit earlier in the year, which means your health insurance company would have to cover 100% of the cost of health services for the rest of the year. Some consumers prefer to have copay plans, which have fixed costs services, as they are easier to plan for throughout the year.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.