Coinsurance in Health Insurance
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What is Coinsurance?
Understanding Coinsurance With an Example
Medical Bill :
AED 25,000
Plan’s Coinsurance :
80/20
Deductible Amount :
AED 5,000
Now, you have to first pay the deductible amount of AED 5,000 in your medical bill. The balance amount of AED 20,000 will be split between you and the insurer.
You will pay 20% * 20,000 = AED 4,000
Insurer pays 80% * 20,000 = AED 16,000
When Do I Need to Pay Coinsurance?
You start paying coinsurance only after the deductible limit is reached. If the medical bill does not exceed the deductible, you must pay the entire amount out of your pocket. The insurance coverage begins only after the annual deductible amount is paid in full by the policyholder.
How Does Coinsurance Work?
Cost sharing is common in health insurance plans. Coinsurance is one type of cost sharing. Copayment and deductibles are the other two types. Coinsurance in healthcare can reduce the premium payable every year.
A higher percentage of coinsurance reduces the risk & liability of the insurer. This benefit is passed on to policyholders as reduced premiums. If the terms of coinsurance are 80/20, the policyholder has to pay 20% of the bill. The remaining 80% is paid by the insurer. Plans with higher coinsurance have lower premiums and vice versa.
Coinsurance can be beneficial for younger policyholders who are fit and healthy. The chances of hospitalization are quite low for such individuals. But they can purchase health insurance for emergencies at lower premiums.
Features & Benefits of Coinsurance
Coinsurance is a standard cost-sharing feature in health insurance plans. It is generally expressed as a fixed percentage of eligible claims.
The medical expenses are shared between the insurer and the insured in a predetermined ratio. This enables the distribution of risk between the two.
The coinsurance percentage is applied only after the annual deductible for your plan has been fully paid.
Coinsurance is paid every time you raise a claim. But the payment toward deductibles ends after paying the stipulated amount.
Policyholders are more careful and responsible while filing claims due to coinsurance. It safeguards the insurer against large claims.
Coinsurance provides an incentive to policyholders to take better care of their health.
Frequently Asked Questions on Coinsurance
Coinsurance in health insurance distributes the risk and liability between the insurer and the insured. It helps to control the cost of insurance coverage and lowers the premium. Policyholders get more responsible and do not raise unnecessary claims.
The out-of-pocket maximum refers to the upper limit or cap on the amount to be paid by policyholders for covered medical services in a policy year. If this limit is reached, then 100% of your eligible medical expenses will be paid by the insurance company. The out-of-pocket maximum includes deductible and coinsurance costs.
Coinsurance in healthcare is typically a fixed percentage of treatment costs. But the actual amount can vary based on the cost of different services.
A health insurance plan with a coinsurance clause will have relatively lower premiums. The premium payable reduces if the percentage of coinsurance increases.
Yes. Coinsurance comes into force only after the annual deductible limit is reached in your health insurance plan. Until this limit, the policyholder bears all the expenses.
Disclaimer: The health insurance policy or plan may have limitations, exclusions, and other terms and conditions that may affect coverage. It is important to carefully review the policy wording before making any decision.