Copayment A fixed amount ($20, for example) you pay for a covered health care service after you've paid your deductible. Let's say your health insurance plan's allowable cost for a doctor's office visit is $100. Your copayment for a doctor visit is $20. Copay in Health Insurance refers to the percentage of the claim amount that has to be borne by the policyholder under a health insurance policy. Few insurance policies come with a mandatory clause for copayment, while others offer policyholders the option for voluntary copayment, which allows them to reduce their premium payment. Co-pay refers to that portion of the claim amount that is to be borne by the policyholder. While certain health insurance policies come with a mandatory co-pay clause, other health insurance plans give policyholders the option to choose a co-pay percentage as per their needs.

© TheStreet What is Coinsurance and How Is it Different From Copay?

For such an important part of the average American's life, health insurance can get incredibly, frustratingly complicated. Rather than simply having the comfort of knowing you are covered for your medical needs, you're expected to understand a variety of terms in order to know what's covered, how much you're covered for and what you'll have to pay for.

One such term is coinsurance, a vague term without any added context. But coinsurance involves both you and your insurance provider, and so it's important to understand what it is and how it functions in the insurance process. Should you require a medical procedure, knowing your coinsurance can help you get a better approximation of how much you'll have to pay, and where to go from there.

So what is coinsurance, and what separates it from other figures in your health insurance? Fashion design free software for mac.

What Is Coinsurance?

Coinsurance is the amount you will pay for a medical cost your health insurance covers after your deductible has been met.

Your deductible, if you weren't aware, is the amount you have to pay before insurance kicks in to help pay. In health insurance, your deductible can get spread to multiple costs or one single cost until it runs out. Once you've reached your deductible, that's when insurance comes in. But in healthcare, you also have the coinsurance to deal with.

Coinsurance is measured as a percentage of what you will pay of the remaining costs compared to what insurance will. Perhaps the most common percentages here are 80/20 - that is to say, your provider will pay 80% of it, and you will pay 20%. Another common set up is 70/30 (you pay 30%).

Coinsurance comes into play when your deductible runs out, and depending on your deductible and your medical history, that amount of time could fluctuate wildly. Someone with a history of medical issues may choose a lower deductible plan (though these tend to have higher premiums) because they anticipate future costs, while someone without a troubling history may be more willing to enroll in a high deductible health plan to avoid high premiums, under the assumption that it is unlikely something major will come up.

Does Your Coinsurance Affect Out-of-Pocket Maximums?

Knowing your deductible is crucial for your health insurance, but once you've reached the end of your deductible you should know your out-of-pocket maximum. That is the maximum amount of overall money you have to pay before your insurance company covers all of the costs.

The money you are personally paying when coinsurance gets factored in does, in fact, go toward your out-of-pocket maximum. So let's say you have a deductible of $1,500 and an out-of-pocket maximum of $5,000. You reach that deductible, and the remaining medical costs you owe lead to $300 out of your own pocket due to coinsurance. Combined, this would mean you've paid $1,800 of your $5,000 out-of-pocket maximum.

So while coinsurance can be a bit of a nuisance, more money you have to take from your own pocket put toward medical costs, it is supposed to have a beneficial purpose of bringing you closer to your maximum. How much your out-of-pocket maximum will be will depend on the sort of insurance plan you end up enrolling in.

Example of Coinsurance

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Let's bring a few figures in to provide a real-life example. Let's say that your healthcare plan has a deductible of $1,000, and you have an 80/20 coinsurance clause.

With this information, say you incur $2,500 in medical costs. You haven't had to use your deductible prior to this, so all $1,000 of it goes toward this cost. From there, we're left with $1,500. How much of this will you be paying via the coinsurance clause?

$1,500 x 20% = 1,500 x 0.2 = $300

Your coinsurance payment here would be $300. Combined with your deductible, that means you would be paying $1,300 to the insurance company's $1,200.

This is why understanding your coinsurance clause is crucial. You're paying much less than you would without insurance, but in this example you still had to pay for more than half of the costs.

If you end up with other medical costs that your insurance covers, though, your deductible is no longer a factor and you would just have to pay the 20% via your coinsurance clause. So if your next medical costs that year are $1,200, you'd only pay $240 of it.

These, however, may be minor examples compared to what medical expenses you may have to deal with. You still have to reach your out-of-pocket maximum before your insurance company starts to cover 100% of the costs. Generally, your out-of-pocket maximum correlates inversely with your premiums. Much like with deductibles, those with higher premiums have lower maximums and those with lower premiums will likely have higher ones.

Coinsurance vs. Copay

Coinsurance and copay, as similar-sounding terms for your healthcare, may be a little confusing. Though they share similarities, they're ultimately different plans for your insurance.

Whereas coinsurance is the percentage you pay for medical costs after your deductible, your copay is a set amount you have to pay for other covered expenses. For example, a prescription medicine can have a copay, as can a physical or other visit to your primary care physician (PCP). Where a coinsurance plan might have you pay 20% for this doctor's visit, a plan with a copay may instead require you to pay a flat fee of $20 while they pay for the rest of it. Depending on the specific figures involved in your specific plan, a copay could be more or less than what the coinsurance is for any given medical cost.

That said, in other ways coinsurance and copay plans are quite similar. Generally copayments, like coinsurance, do not go toward your deductible but do go toward your out-of-pocket maximum.

Coinsurance in Other Insurance Industries

Coinsurance is most prevalent in the health insurance industry. But coinsurance is a way for insurance companies to try and mitigate risk in the event that expenses add up more than they anticipated, so it's not uncommon for you to find coinsurance in other insurance industries as well.

For example, you may find a coinsurance clause when dealing with property insurance. In this industry, the coinsurance dictates that the property must be insured for a percentage of its value. This is particularly common in commercial property.

Apple mac microsoft office free download. Much like in health insurance, 80% coinsurance is the most common percentage. That meant if you had a $500,000 property, you would need to insure it for, at the very least, $400,000.

Let's say, though, that you didn't do that. You decided to only insure it for $300,000 in an attempt to save money on the deal. This could lead to a costly coinsurance penalty if something goes wrong.

You should have insured it for $400,000 but only went as far as $300,000 to insure your property (and you have a deductible of $2,000). Now let's say a pipe bursts in the building, causing excessive damage that totals up to $200,000. Your insurance will, when reviewing the case, notice you did not get the amount of insurance the coinsurance clause required and will impose a penalty.

To figure out the penalty, your insurance will divide the amount of insurance you got by how much you were supposed to (in this case, 300,000/400,000 or 0.75) and multiply that by your damage. 200,000 x .75 = $150,000, which is how much your insurance will pay. Thus, here your coinsurance penalty is a whopping $50,000.

This article was originally published by TheStreet.

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With healthcare costs on the rise, purchasing a health insurance policy with a comprehensive coverage has become a must if you want to safeguard your savings and avoid going through financial hassles in the event of a medical emergency. When you purchase a health insurance policy, your insurance provider will offer you a cover against medical expenses that you might incur in case of a hospitalisation or a medical treatment.

Based on the type of claim you raise (cashless or reimbursement), your insurance provider will either settle your medical bills directly with the hospital or reimburse you for the same. While a health insurance policy can be a great way to reduce the expenses that you may incur in the event of a hospitalisation, you will still have to pay a part of the hospitalisation bills if your policy came with a co-pay clause or if you opted for co-pay at the time of purchasing the plan.

What is Co-Pay?

Co-pay refers to that portion of the claim amount that is to be borne by the policyholder. While certain health insurance policies come with a mandatory co-pay clause, other health insurance plans give policyholders the option to choose a co-pay percentage as per their needs. Opting for a high co-pay will lower your premium payable, but will increase the amount that you have to pay in the event of a claim. Similarly, opting for a low co-pay will increase your premium payable, but will reduce the amount that you have to pay in the event of a claim.

Thus, for example, if you have opted for a co-pay of 10% and you raise a claim for Rs.10,000, the insurance provider will pay only 90% of the claim amount. The remaining 10% or Rs.1,000 will have to be borne by you.

What Is Copay In Medical Insurance

Types of Co-Pay Clauses

Not all health insurance policies come with a mandatory co-pay clause. The co-pay clause may be applied to health insurance plans in the following manner:

• Co-Pay on all Medical Bills: In this case, the co-pay clause, whether mandatory or voluntary, is applied to all claims that are raised. Thus, the policyholder will need to pay a part of the claim amount for all claims raised.
• Co-Pay on Senior Citizen Policies: Most health insurance plans that are offered to senior citizens come with an inbuilt co-pay clause since treatment costs for senior citizens are usually quite expensive.
• Co-Pay for Reimbursement Claims or Treatment at Non-Network Hospitals: Certain insurance providers will specify a co-pay clause only for reimbursement claims or treatments undertaken at non-network hospitals. In this case, cashless claims will be borne fully by the insurer.
• Co-Pay for Hospitalisation in Metro Cities: Hospitalisation costs at a metro city are usually much higher than treatment costs at a smaller city or town. Thus, insurers might add a co-pay clause for treatments undertaken at large cities.

Why do Health Insurance Policies have a Co-Pay Clause

What Is Copayment In Medical Insurance India

• To avoid unnecessary claims: In health insurance, there is no limit to the number of claims that a policyholder can make during a given policy year. Policyholders can continue making claims until the sum insured is completely exhausted. Thus, having a co-pay clause will reduce the chances of policyholders raising claims for small treatments/hospitalisations.
• To reduce the risk for the insurer: When there is a co-pay clause in the policy, the insured is expected to pay a certain part of the claim amount. Thus, in such a case, the insurer will not have to pay 100% of the claim amount, which, in turn, reduces the risk for the insurance company.
• To encourage judicious use of the policy: Having a co-pay component in your health insurance policy is one way for insurers to ensure that you use your policy judiciously. It also helps prevent fraudulent claims to a large extent.
• To lower premium amounts: Opting for co-pay will reduce the premium payable significantly. Thus, policyholders who don’t have too many health concerns and are looking to reduce their premium rate can opt for co-pay.

Things to Consider before Opting for a Co-Pay

Given how affordable a policy with a co-pay clause can be, it can be tempting to purchase a health insurance plan with a high co-pay percentage. Cake mania 3 free. download full version mac. However, before you purchase such a policy, make sure to understand your coverage needs and ascertain if you have the finances to pay for your part of the hospitalisation bills in case of an unplanned or planned hospitalisation.

FAQs on co-pay under health insurance

1. How do I know how much I have to pay as co-pay at the time of claim settlement?

Your policy document will have details regarding co-pay – whether or not you should pay and if you need to pay, then what the percentage is. Make sure you read the policy document at the time of purchase so that you do not miss out on such fine details.

2. Why are policies with the co-pay clause cheaper?

The co-pay clause reduces the insurer’s risk of paying a large amount. Since the co-pay clause keeps the insured in check, in terms of raising claims frequently or making fraudulent claims, the health insurance company offers the policy at a cheaper price than one that does not have a co-pay clause.

3. Is co-pay the only way I can reduce the premium payable?

No, there are many ways by which you can save on your premium such as only choosing a sum insured amount that you require, not opting for unnecessary benefits or add-ons, maintaining a claim-free year, purchasing the policy online, etc.

4. Is co-pay applicable to cashless hospitalisation?

Most insurance companies apply the co-pay clause only for reimbursement claims to encourage policyholders to get treatments in network hospitals. The insurer usually covers the complete expenses incurred by the insured person at a network hospital.

5. Can co-pay be applied for specific benefits?

Yes, the co-pay clause can be applied to specific benefits such as the room rent. Choosing an A/C room or a suite may attract co-pay while regular rooms will not. Also, the benefit payable for the treatment of a critical illness or domiciliary hospitalisation expenses may require the policyholder to share the expenses incurred.

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