What does the term "cost-sharing" refer to in health insurance?

The term "cost-sharing" in health insurance refers to the division of healthcare costs between the insurer and the insured. This practice involves sharing the financial burden of healthcare expenses through mechanisms such as deductibles, copayments, and coinsurance. When a patient receives medical care, the insurer covers a portion of the costs, while the insured individual is responsible for paying a portion, thus fostering awareness and engagement in healthcare spending.

Understanding this concept is crucial for policyholders because it impacts their out-of-pocket expenses for medical services. By sharing costs, health insurance plans aim to lower overall healthcare spending and mitigate the financial risk for both parties. Cost-sharing is a fundamental aspect of many health insurance plans and reflects the collaborative nature of financing healthcare.