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Co-insurance Overview


Coinsurance and the Out-of-Pocket Expense Cap
Once you meet your out-of-pocket cap, the insurance company covers 100 percent of your expenses.
Once you meet your out-of-pocket cap, the insurance company covers 100 percent of your expenses.
© Photographer: Hdconnelly | Agency: Dreamstime.com

Both coinsurance and deductibles count toward your out-of-pocket expense cap, or the amount that needs to be met in order for the insurance company to pay 100 percent of your policy's benefits. (See How Out-of-Pocket Expenses Work for more information.) For example, if you have a PPO plan, once you meet your deductible, the insurance company will begin paying 80 percent of your doctor's bills. Your deductible, along with each 20 percent that you pay after the deductible, goes toward your out-of-pocket expense cap. These caps are normally set at around $2,000 to $3,000 per year, but can vary widely. Once this cap is reached, the insurance company will pay 100 percent of the "reasonable" or "customary" fee of a provider. However, your co-payments and monthly insurance premium are not applied to this cap. 

So, what exactly is the purpose of this cap? It benefits both you and the insurance company. The benefits to the insurance company are obvious. It cuts down costs by sharing a larger amount of health care expenses with you, because many of us will never meet this cap. But it can also help you by covering your medical bills in the event of a catastrophic medical situation. For example, many healthy people don't meet a cap of $2,000 to $3,000 per year. However, if you suddenly acquire an illness or chronic condition, you could easily meet the cap in the first month or two of treatments. After this time, the insurance company will cover you 100 percent to the lifetime maximum, insuring proper health care during a critical time.

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Follow the links on the next page for more information about coinsurance.