What is "coinsurance"?

Coinsurance is best understood as a cost-sharing agreement between the insurer and the insured. In this arrangement, the insured is responsible for paying a certain percentage of the covered healthcare expenses after they have met their deductible. This means that once the insured has paid out-of-pocket for medical care up to a specified amount (the deductible), they will then share the cost of future healthcare expenses with their insurance provider according to the agreed-upon percentage. For example, if the coinsurance rate is 20%, the insured would pay 20% of the costs of their eligible healthcare services, while the insurance company would cover the remaining 80%.

This concept is vital in managing healthcare costs for both insurers and insured individuals, as it incentivizes the insured to be more mindful of their healthcare spending after reaching their deductible. Understanding coinsurance helps individuals to better prepare financially for their healthcare needs, as they are aware of the ongoing costs they will incur even after reaching their deductible limit.