When shopping for health insurance, you will likely come across the terms “deductible” and “coinsurance.” These two terms can be confusing, but it’s important to understand the difference between them to make informed decisions about your healthcare coverage.
What is a deductible?
A deductible is the amount of money you must pay out of pocket for healthcare expenses before your insurance kicks in. For example, if you have a $1,000 deductible, you will be responsible for paying the first $1,000 of your healthcare costs before your insurance begins to cover any expenses.
It’s important to note not all healthcare expenses are subject to your deductible. Many insurance plans offer preventive care services (annual physicals or mammograms, for example) which are not subject to your deductible. However, if you need to visit a doctor or receive any other medical treatment, you will likely have to pay the full cost of these services until you meet your deductible.
Once your deductible has been met, your insurance will begin to cover a portion of your healthcare expenses. This is where coinsurance comes in.
What is coinsurance?
Coinsurance is the percentage of healthcare costs you are responsible for paying after you meet your deductible. For example, if you have a coinsurance rate of 20%, your insurance will cover 80% of your healthcare expenses, and you will be responsible for paying the remaining 20%.
Coinsurance typically only applies to certain healthcare expenses, such as hospital stays or surgeries. Some insurance plans may also have a maximum out-of-pocket limit, which is the most you will have to pay in coinsurance and deductible costs combined for the year.
Understanding the difference between deductible and coinsurance
The main difference between deductible and coinsurance is the timing of when you pay for healthcare expenses. With a deductible, you have to pay a certain amount out of pocket before your insurance begins to cover any expenses. With coinsurance, you are responsible for paying a percentage of healthcare costs after you meet your deductible.
Both deductible and coinsurance can impact your healthcare costs and the amount you pay for insurance premiums. Plans with lower deductibles and coinsurance rates typically have higher premiums, while plans with higher deductibles and coinsurance rates typically have lower premiums.
When choosing a healthcare plan, it’s important to consider your healthcare needs and budget to determine which plan will provide you with the best coverage at the most affordable cost.