Coinsurance
Percentage of costs the insured shares with the insurer after the deductible is met.
Coinsurance in health insurance is the percentage of healthcare costs that the insured pays after meeting their deductible, with the insurance company covering the remaining percentage. A plan with 20% coinsurance means the insured pays 20% of covered costs after the deductible, while the insurer pays 80%—a cost-sharing arrangement that creates ongoing patient financial responsibility (not just a one-time threshold like a deductible).
Coinsurance example: Patient with $2,000 deductible (already met) undergoes a procedure with an allowed amount of $10,000. With 80/20 coinsurance: insured pays $2,000 (20%) and insurer pays $8,000 (80%). Coinsurance applies to the insurer's allowed amount—the negotiated rate with in-network providers, not the provider's billed charge.
The coinsurance percentage varies by plan tier (Bronze: 40%+ coinsurance; Silver: 30%; Gold: 20%; Platinum: 10%) and service type (inpatient may have different coinsurance than outpatient). The ACA's metal tier structure standardizes actuarial values, with Bronze plans covering roughly 60% of costs and Platinum covering 90%.
In commercial property insurance, coinsurance has a different meaning: a requirement that the insured carry insurance equal to a specified percentage (typically 80–90%) of the property's replacement cost value. If the insured carries inadequate coverage (below the coinsurance percentage), they become a co-insurer—bearing a proportional share of any partial loss.
Property coinsurance formula: (amount of insurance carried ÷ (coinsurance % × property value)) × loss amount = insurer's payment. If property worth $1M has an 80% coinsurance requirement and the insured carries only $600,000: ($600K ÷ ($800K)) × loss = 75% of any loss is covered.
FAQs
What is the difference between coinsurance and copayment?
Coinsurance is a percentage split of costs between insured and insurer—you pay 20% of every covered service, insurer pays 80%. The dollar amount you pay varies with the service cost: a $500 service costs you $100; a $5,000 service costs you $1,000 (both at 20% coinsurance). A copayment is a fixed dollar amount per service—you pay $40 per specialist visit regardless of whether the visit costs $300 or $600. Copays are predictable (same amount every time); coinsurance is unpredictable but proportional. Most plans use copays for routine services (visits, prescriptions) and coinsurance for more expensive services (hospitalizations, procedures, imaging).
How does coinsurance work in property insurance?
Property insurance coinsurance requires the insured to maintain coverage equal to a specified percentage (usually 80–90%) of the property's replacement cost value or become a co-insurer in partial losses. If a $1M building has an 80% coinsurance requirement but is only insured for $600,000 (75% of required $800,000), the insured bears 25% of all losses (the shortfall percentage). A $200,000 fire loss would result in: ($600K/$800K) × $200K = $150,000 paid by insurer; $50,000 borne by insured. This provision incentivizes policyholders to insure to full value. Annual property reappraisals are important because rising replacement costs can create coinsurance penalties even if coverage levels haven't changed.
What is an ACA metal tier and how does it relate to coinsurance?
ACA metal tiers (Bronze, Silver, Gold, Platinum) represent standardized actuarial value ranges—the percentage of average covered costs the plan pays for a standard population. Bronze: ~60% actuarial value (insured pays ~40% on average); Silver: ~70%; Gold: ~80%; Platinum: ~90%. Higher tiers typically have lower coinsurance percentages and deductibles but higher premiums. The metal tier system makes plans comparable across insurers—a Gold plan from any insurer has approximately 80% actuarial value. The optimal tier depends on expected healthcare usage: low users often prefer Bronze (lower premiums, accept more cost-sharing for infrequent use); frequent users prefer Gold or Platinum (higher premiums but lower cost-sharing per service).
Related Terms
Deductible
Amount the insured must pay out-of-pocket per claim before insurance coverage begins.
Copayment
Fixed amount the insured pays for a covered health care service at the time of service.
Out-of-Pocket Maximum
Annual cap on total cost-sharing required of an insured under a health plan.
Premium
Regular payment made by a policyholder to maintain insurance coverage.
