To help you better understand healthcare and your insurance policies, we are breaking down common terms related to the health insurance industry in a series called Health Insurance 101. Part 1 of the series can be found here.
Cost Sharing, Co-pays and Coinsurance are commonly confused forms of payment. While cost sharing refers to splitting certain costs with a healthcare provider, co-pays are typically set payments for services. For example, your health insurance plan may require you to pay a specified amount for a physicians visit, a generic drug, or a hospital stay. The healthcare provider is then responsible for the rest of the cost.
Cost-sharing, however, is when you agree to pay for a portion of the services in your health plan. Common cost-sharing services include deductibles and co-payments. Therefore, co-payments are a form of cost-sharing between an individual and a provider network. Charges from physicians that are not in your provider network are not included in cost sharing (meaning your insurance provider won’t help pay for that bill).
Coinsurance is usually a percentage of the healthcare bill for services that you are required to pay. For example, if your insurance carrier agrees to pay 80% of your healthcare costs for specified services (after satisfying and deductible or co-pay specifications), then you may be required to pay the other 20%.
Therefore, a co-pay is a specified form of cost-sharing between you and your healthcare provider as established in your insurance plan. Coinsurance is the percentage of cost-sharing that you agree to pay after reaching all deductibles and co-payments stated in your health insurance plan.
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