First, what is the official definition of co-insurance?
Once you have met your deductible, you pay coinsurance for additional medical care. It is a percentage of the billed charge. For example, your insurance company might pay 80%, and then you would pay 20%. It is similar to a co-pay, but is a percentage instead of a dollar amount.
Now, let’s dig a little deeper. With California health insurance, it is common to speak of their plan as an 80/20 plan or a 70/30 plan. They are essentially referring to the co-insurance part of it. With the 80/20 example, the health carrier is picking up 80% of the charges and you are picking up the remaining 20%. If there is any kind of deductible, you must pay that first at 100% until met.
Let’s take an example and see how California health insurance plans essentially break down into three main stages.
Stage 1 – The deductible YOU PAY 100%
Let’s say you have a $500 deductible. Except for services that are separate from the deductible (usually office visits and prescriptions…see COPAYS), you will pay the discounted charges at 100% until you meet your deductible. You can find more information on deductibles.
Stage 2 – The co-insurance YOU SHARE A PERCENTAGE
Once the deductible is met, you then start sharing the cost with the carrier. Let’s say our plan is 70/30 and the charge is $1000. You pay the first $500 (deductible) and then you pay 30% of the remaining $500…or $150. Of the first $1000 charge, you would pay $650 out of it. If you have another $1000 charge in that same calendar year, you would pay 30% of the 1000 (or $300) since your deductible was already met. When do you stop paying the 30%??
Stage 3 – The Max Out of Pocket THE CARRIER PAYS 100%
Once you have met your Max out of Pocket (sometimes called the Copay Maximum), the carrier will then pay 100% of covered benefits, in-network. For our plan example, let’s say we have a $500 deductible, 70/30 co-insurance, and $5000 max out of pocket. If we get a $50,000 bill in a calendar year, you pay the first $500, then 30% until you reached another $5000 out of pocket. For that $50K, you would pay $5500 and the carrier would pay $45,500. Co-insurance is nice but the real reason to have health insurance is the max out of pocket.
Co-insurance usually applies to services outside of the office visit and prescriptions. You will typically see the same co-insurance percentage for hospital, lab, surgery, emergency (sometimes has separate additional copay) and physician services.
It’s important to stay in network for PPO plans. Let’s say you have 70/30 plan and you see a doctor out of the PPO network on a non-emergency basis for $1000 of services and your deductible is already met (you’re in Stage 2). Two things will probably happen. The health insurance plan will probably have a separate percentage for out of network…let’s say 50/50 instead of 70/30. Also, the carrier will apply this lesser percentage to what they would pay an in-network provider. For example with the $1000 charge, perhaps the contracted PPO rate is $600 (discount is usually 30-60%). The carrier would then pay 50% of the $600 or $300 of the total $1000. You pay $700. Compare this with the 30% of 600 you would pay for an in-network provider. $700 versus $180 out of your pocket. Use in-network providers!