Coinsurance In Health Insurance

Coinsurance in a health insurance plan refers to the amount that you’re required to pay towards a medical treatment after paying the out-of-pocket deductible cost. It is usually denoted as a fixed percentage and is often paid directly to the health insurance provider. 

 

In a health insurance plan with coinsurance, you need to pay a fixed percentage of the treatment cost out of your pocket. The remaining cost of treatment will be borne by the health insurance provider. 

Important Update (Dated May 30, 2024) – Good news for Health Insurance policyholders! According to the Master Circular on Health Insurance Business 29052024 rolled out on May 29, 2024 by IRDAI, insurers are to decide on the request for cashless claims within 1 hour of receiving the request. Also, the final claim is to be granted within 3 hours after the policyholder’s discharge from the hospital. Insurers have been directed by IRDAI to establish necessary systems and procedures for this process by July 31, 2024. The Master Circular on Health Insurance Business 29052024 circular is available here - https://irdai.gov.in/document-detail?documentId=4942918

How Does Coinsurance Work?

Coinsurance is the percentage of the treatment cost that you have to bear before the insurer starts covering the medical expenses. It is a form of cost-sharing between you and the insurance provider. Coinsurance is usually a fixed percentage of the treatment cost. However, it applies after you (the policyholder) have surpassed the deductible amount applicable under your plan. 

Understanding Coinsurance With an Example

Let us assume that the coinsurance term of your health insurance plan is in the 80/20 ratio and that your plan has an annual out-of-pocket deductible of ₹2,000. Now, say that you suddenly require urgent surgery early in the year that will cost you ₹50,000. Since you may not have met your deductible amount this early in the policy period, you will first pay the ₹2,000 of the total bill. 

 

After meeting the deductible of ₹2,000, you will then be responsible only for the co-insurance payment i.e., 20% of the remaining bill amount, which will be ₹9,600 (20% of ₹48,000). Your health insurance provider will cover the remaining 80% of the treatment cost. Later in the year, if you need to undergo another medical treatment, your coinsurance clause will come into effect immediately as you have already met your annual deductible.

How Does Coinsurance Benefit the Policyholder?

If you are considering buying a health insurance plan with co-insurance, the main benefit it offers you is lower premiums. If you opt for co-insurance in health insurance, where you pay a fixed percentage of your medical costs, your insurance premiums towards the policy will be lower. But it is recommended to consider the out-of-pocket expenses that you might have to bear every time you raise an insurance claim while opting for a plan with coinsurance.

When should I pay coinsurance?

You need to pay co-insurance if you meet the deductible offered by your health insurance plan. Your plan keeps track of how much payment you make towards your deductible. This information can be found in the Explanation of Benefits (EOB) that your health plan provides you after you receive treatment. The EOB specifies how much co-insurance you must pay if required. This amount can be paid directly to the hospital, pharmacy, or doctor's office.

How to Calculate Coinsurance Payments?

To calculate the coinsurance payment that you must bear, you need to understand the rate applicable to your health plan. If the co-insurance is 20% of the medical costs, then you can first convert the percentage into a decimal. Hence, co-insurance of 20% would become 0.20 and that of 15% would become 0.15. Then, you can estimate the payment in the following way:

 

Coinsurance Rate x (Total Cost of Bill - Deductible) = Amount to be Paid

 

Let’s take the example discussed above, with a coinsurance of 20%, a deductible of ₹2,000 and a total medical cost of ₹50,000.

 

0.20 x (₹50,000 - ₹2,000) = ₹9,600

 

Thus, the amount you are required to pay after covering the deductible is ₹9,600. However, you must remember that you need not consider the health insurance deductible component after you have cleared it during the policy term.

What does it mean by 30% Coinsurance?

Co-insurance is part of a covered expense that is paid for by an insured person. It is expressed in percentage. A "30% coinsurance" policy implies that you are responsible for paying 30% of any medical bills that you incur and the remaining 70% is paid by your health insurance policy.