What is the role of coinsurance in health insurance?

Coinsurance is a provision in health insurance that establishes a partnership in cost-sharing between the insurer and the insured after a deductible has been met. This means both the insurance company and the policyholder contribute to the costs of covered services. Typically, coinsurance is expressed as a percentage, indicating the portion of the healthcare costs that the insured is responsible for after the deductible.

For instance, if an insured has a coinsurance rate of 20%, that means the insurer will cover 80% of the costs for a covered service, and the insured will be responsible for the remaining 20%. This structure encourages insured individuals to be more mindful of healthcare costs since they are directly responsible for a portion of those expenses.

Understanding the role of coinsurance is critical in evaluating health insurance plans and can influence decisions related to healthcare utilization and budgeting for medical expenses. It aligns the interests of both parties by helping to manage overall healthcare costs, rather than placing the entire financial burden on one side.