Differences between copayment and coinsurance

Differences between copayment and coinsurance

What is coinsurance?

We have likely seen in our insurance policy, the word Coinsurance; as it corresponds to an amount, which is generally expressed in a fixed percentage, the equivalent of which must be paid by us, in our capacity as insured, because of a claim, after having reached the deductible.

When it comes to health insurance, the coinsurance provision is very similar to what is provided for a Copayment. Except for copayments, they require a fixed dollar amount to be paid by the insured when the service is received.

It should be noted that some homeowners insurance policies contain coinsurance provisions.

In other words, coinsurance refers to the sharing of risk, one part is assumed by the insured and the other part, the insurer. As a representative of perhaps several insurers who assume with complete independence, one from another, the obligation to respond separately from the part of the risk that corresponds to them.

More simply, coinsurance is the amount of money, which is not covered by the health policy of the insured or patient and must be paid for each health care service. For example, if our plan pays 80% of the cost of the service, then the remaining 20% ​​of the cost corresponds to the coinsurance that we must pay as members.

How does the coinsurance work?

By knowing the definition of Coinsurance, we already imagine how it works. We commonly have that in the conditions of the coinsurance, an 80/20 division is presented.

Based on the provisions of an 80/20 coinsurance plan, as insured we are responsible for 20% of health care, in short, of total medical costs. While the insurance agency must pay 80% of the remaining amount.

However, the provisions of these terms can only be applied after the insured has reached the amount that corresponds to the deductible that we have agreed upon in contracting the policy.

Additionally, most health insurance policies include a maximum amount for out-of-pocket expenses, which limit the total amount that as insured we pay for the care service in a specific period.

Differences between copayment and coinsurance

To better understand it, it is essential to know the definition of Copayment, which response to the amount of money we pay as insured / patient with medical insurance, at the rate of each health care service we receive.

For example a medical consultation, for laboratory tests, for medicine prescriptions, and hospitalization.

The corresponding amount of the copayment often depends on the type of healthcare received. It is also known as the copayment fee.

We, therefore, have that both what is available in the copayment and the coinsurance, are the ways that insurance companies have to distribute the risk among the people involved in the insurance.

However, both terms have benefits or advantages, as well as disadvantages for consumers.

Below we will list the three most notable differences between Copayment and Coinsurance:

  1. The copayment is a fixed amount of money that we pay for a service. Regardless of how much the doctor or hospital will charge for the care received. While Coinsurance is not a set amount of money to pay, but a percentage of the amount allowed by the insurer for the service.
  2. The time to apply the Copayment can be before or after paying the total deductible. And the Coinsurance generally applies after the deductible has been paid.
  3. Copayment is payable at the time the service is received, the Coinsurance is paid after the provider and the insurer have negotiated the discounts.

Property insurance coinsurance

The term and coinsurance provisions are also applied in the insurance policies of the property, which must be acquired by the owners to guarantee good r coverage.

For this, in the property insurance policy, in the coinsurance clause, it is required to specify that the house is insured for a percentage of its total cash or the replacement value.

In common, a percentage of 80% is set, although different providers may require different percentages of coverage.

In cases where a structure is not insured to this level, and the situation arises that the owner makes a claim for a covered peril, the provider has the power to impose a coinsurance penalty on the owner.

As an example, we have that a property is valued at $ 200,000 and the insurance provider requires a coinsurance of 80%, the owner must have $ 160,000 for insurance coverage on the property.

Property owners can include a waiver of the coinsurance clause. Generally, insurers tend to waive coinsurance in situations where claims are quite small. However, there are cases, where the policies include the waiver of the coinsurance when the total loss of the property is declared.

Coinsurance Example

Suppose we take out a health insurance policy, where we agree to a coinsurance of 80/20, with a deductible of $ 1,000 and with a maximum out-of-pocket of $ 5,000.

At the beginning of the year, we were presented with the need to undergo outpatient surgery that costs $ 5,500. Since we have not met our deductible, we must pay the first $ 1,000 of the billing.

After meeting our deductible of $ 1,000, we are responsible for 20% of the $ 4,500 pending payment, that is, $ 900. The company that provides our insurance is responsible for covering 80% of the remaining balance.

On the occasion of requiring in the future, another high-cost medical procedure during the year, our coinsurance provision, will take effect automatically, since we have already fulfilled our of the year.

Furthermore, having paid a total amount of $ 1,900 out of our pocket while in the active period of the policy, the maximum amount that we must pay for the services to be received throughout the rest of the year will be $ 3,100.

Upon reaching the maximum disbursement of $ 5,000, our insurance provider company will be responsible for the payment up to the maximum limit of the insurance policy. Or for the maximum benefit allowed under a certain policy.

It is appropriate to remember that coinsurance must also be applied to real estate insurance policies. Where the owners acquire insurance to guarantee coverage against damage to it, caused by damage, accidents, and even meteorological phenomena.

By aamritri

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