Anyone who is subscribed to health insurance may have heard of the term coinsurance, but what does 0 coinsurance mean? 0 coinsurance in health insurance means that your health insurance provider covers the total cost of your medical bill.
Coinsurance is a form of cost-sharing between the insurance company and a client. It is the amount you pay as a patient toward your claim.
Coinsurance is typically paid after meeting your annual deductible. To paint a clearer picture of how coinsurance works, let’s use 10% and 0% as examples.
How Does It Work?
Scenario One
A 10% coinsurance means that you cover 10% of your health provider’s total cost of service while your insurance company will cover the remaining 90%. Coinsurance applies to office visits, operations, and medications.
If you visit your dentist and your bill is $50, you will pay $5 and your insurance company will pay the remaining $45.
Scenario Two
0% coinsurance means that you don’t have to share the cost of your medical bills with your insurances company and they will cover the total cost.
If you go to a clinic and the cost of your prescription is $30, your insurance company will cover the full amount.
Other Health Insurance Terminologies
Coinsurance and copays in health insurance are referred to as out-of-pocket costs; these are expenses that you incur for receiving health services in addition to your monthly premium.
To fully understand out-of-pocket costs, there are other health insurance terminologies you should be familiar with.
Deductibles
A deductible is an amount you pay before you can start enjoying your coinsurance or copay. That is to say, it is the cost of medical bills you must cover before your insurance company begins to split cost with you.
If your deductible is $500, you would have to pay up the $500 before your insurance provider chips in on your medical cost.
High deductible plans usually have lower monthly premiums to balance out the cost. However, these plans will force you to spend a lot of money on your healthcare before they start contributing.
Lower deductible plans typically come with higher monthly premiums. However, because your deductible amount is smaller, your insurance company begins their contribution sooner.
Annual Limit
Annual limits are like deductibles for insurance companies; it is the highest amount they can incur on the healthcare cost within a policy year.
Once this amount is reached, the client is forced to pay out-of-pocket bills.
Luckily, the Affordable Care Act has prohibited insurance providers from setting annual dollar limits on most plans, though there are exceptions.
Out-of-Pocket Maximum
From the name you can guess what this means. The out-of-pocket maximum is the highest amount you can spend on healthcare within a policy year. If you reach this amount, your insurance company will bear any remaining costs throughout your policy year.
Coinsurance Vs Copay- Are They the Same?
Coinsurance and copays are two terms you will encounter often once you are within the health insurance scheme. The two are similar in terms of function but there is a key difference between the two.
Coinsurance is computed as a percentage, whereas copay is a flat fee. Let’s give you an example to understand it better.
Let’s say your insurance provider has set $30 copay on doctor visits, and $10 copay on prescribed medication.
In this scenario, whatever your bill is at a doctor’s appointment, you are expected to pay $30, and anytime you have prescribed medication, you are to pay $10 as part of the cost.
An advantage of copay over coinsurance is the certainty attached to how much you are expected to pay. Even if your consultation fee is summed up at an expensive rate, you would not have to pay more than your copay requires.
Unlike coinsurances where the higher the bill, the higher you would have to pay. Because of this, copays are usually more affordable than coinsurances.
That is not to say that all coinsurance plans are bad. However, it would be best to consult with a licensed professional on what plan best suits you.
How To Lower Your Coinsurance Rate
Keep in mind that your coinsurance rate does not have to be high for your out-of-pocket payment to start becoming expensive. 10% of a $100 is $10, and 10% of $400 is $40.
The same percentage but a higher out-of-pocket cost, hence the more expensive your bill, the higher you would have to pay out of it.
Fortunately, there is a way for coinsurance rates to be lowered. You can lower your coinsurance rate through cost-sharing reduction (CSR) subsidies.
Once you meet certain criteria set out by these subsidies will reduce your coinsurance, copayments, deductibles, etc by increasing the actuarial value of your plan.
The actuarial value of a plan is the set percentage for the total average cost of covered benefits under that plan.
If you register under a plan with an actuarial value of 60%, it means you can expect your insurance plan to cover 60% of the average costs and you will be expected to cover the remaining 40% .
In essence, the higher the actuarial value of the plan you are registered under the lesser you would have to pay.
Some plans offer 0% coinsurance meaning that once you have reached your deductible, the insurance company will cover 100% of your bill without any further payment on your end.
Conclusion
Your coinsurance on a health plan can make or break your experience throughout your policy year. A high rate could lead to spending large amounts on out-of-pocket costs for the medical care you receive, defeating the objective of getting health insurance- to minimize or possibly eliminate cost. And a rate on the low side is usually followed by costly monthly premium payments. Luckily, you have a chance of reducing your coinsurance rate if it is on the high side through Cost Sharing Reduction subsidies.