When choosing a health insurance plan a key distinction to be aware of is whether the plan comes with coinsurance or copay requirements. Both require you to pay for part of your health care costs, and relieve the insurance company of the total cost burden, but the way each works is different. This article will help you understand the differences so you are aware of what having coinsurance vs. copay in your plan will mean to you.

Coinsurance

Coinsurance will require you to pay a percentage of your health insurance providers cost for different types of visits to health practitioners. For example, if you have 10% coinsurance rate for doctor's visits and your visit costs $50, you will have to pay $5 while your insurer picks up the remainder.

Coinsurance requirements are becoming increasingly popular with insurance companies as it protects them from the full burden of significant health expenditures. If you require a major medical procedure with a $100K total cost the insurance company can avoid a significant cash outflow through your coinsurance requirement.

One thing to be careful of with coinsurance is to ensure that the rate your % is being applied to is the doctor's reduced rate with your health insurance company. Many companies negotiate reduced rates with practitioners, and it's not uncommon for individuals to have their coinsurance charged on the full rate accidentally.

Copay

Copay is another form of payment you make related to health care but is set at fixed rates for different types of services, i.e. a flat $10 rate for visiting a doctor. The insurance company then picks up the remaining costs related to that doctor visit.

Copay arrangements are advantageous for individuals as it fixes your costs related to health services and you know up front what you will have to pay out. If complications arise during some procedure and the costs go up significantly, the insurance company is on the hook for it as you've already made your copay. Insurance companies are naturally resistant to this risk exposure, hence why coinsurance requirements are becoming more common.

Which is Better?

For individuals generally a copay is going to be the better option, as while the copay fee for small items may be high you are protected from the major cost escalators that can occur in some surgeries. With a coinsurance structure you could quickly find yourself wiped out financially if a complication occurred in a procedure and your bill suddenly shoots into the tens of thousands of dollars (or more).

Many insurance companies have worked both copay's and coinsurance requirements into different aspects of the plans they offer so it is very important to review in detail all of the specific terms of your health plan. Different tiers or packages in a plan may have different terms associated with them when it comes to what your payment requirements are. Reviewing your plan in detail can be time consuming but if you don't do it you can be surprised when you go for a procedure and find out the financial expectations are very different from what you expected them to be.