FinanceFirst financial glossary
What is Coinsurance?
A direct definition, followed by examples, comparisons, related concepts, and the sources that support the explanation.
Written by Asim Ahmad, Founder and Editor, FinanceFirst
Definition
In one sentence about Coinsurance
Coinsurance is the percentage of covered medical costs you pay after meeting your deductible. In a typical 80/20 plan, your insurance pays 80% of allowed charges and you pay the remaining 20% until you reach your out-of-pocket maximum. Coinsurance applies to most services after the deductible and stops once your annual out-of-pocket cap is reached.
Why Coinsurance Matters
Coinsurance determines how much you pay for medical care after your deductible is met, and it can result in significant out-of-pocket costs for expensive procedures. For example, if you have surgery costing $50,000 and your plan has 20% coinsurance, your share is $10,000 (assuming you have already met your deductible). However, the out-of-pocket maximum caps your total liability. According to CMS, the 2025 out-of-pocket maximum for ACA marketplace plans is $9,200 for individuals and $18,400 for families. Understanding coinsurance helps you anticipate costs for hospital stays, surgeries, and other major medical events.
Real-World Example: How Coinsurance Splits Costs
Here is how different coinsurance rates affect your cost for a $20,000 hospital stay, assuming a $2,000 deductible has already been met:
| Coinsurance Split | Insurance Pays | You Pay (Coinsurance) | Total You Pay (incl. deductible) |
|---|---|---|---|
| 90/10 (you pay 10%) | $18,000 | $2,000 | $4,000 |
| 80/20 (you pay 20%) | $16,000 | $4,000 | $6,000 |
| 70/30 (you pay 30%) | $14,000 | $6,000 | $8,000 |
| 60/40 (you pay 40%) | $12,000 | $8,000 | $10,000 |
Coinsurance Calculation
Coinsurance is calculated on the allowed amount after your deductible. The formula is: Your coinsurance = (Allowed amount - Deductible already applied) x Your coinsurance percentage. Here is a step-by-step breakdown:
| Step | Description | Amount |
|---|---|---|
| 1. Total bill | Hospital charges the full amount | $15,000 |
| 2. Allowed amount | Insurance negotiated rate | $12,000 |
| 3. Deductible | You pay first (if not already met) | $2,000 |
| 4. Remaining after deductible | $12,000 - $2,000 | $10,000 |
| 5. Your coinsurance (20%) | 20% of $10,000 | $2,000 |
| 6. Insurance pays (80%) | 80% of $10,000 | $8,000 |
| 7. Your total cost | Deductible + coinsurance | $4,000 |
When Coinsurance Applies
Coinsurance typically applies in these healthcare situations:
- Hospital stays and inpatient care: After meeting your deductible, coinsurance determines your share of room, board, and treatment costs
- Surgical procedures: Both inpatient and outpatient surgery costs are subject to coinsurance after the deductible
- Diagnostic imaging: MRIs, CT scans, X-rays, and other imaging services often fall under coinsurance rather than a flat copay
- Laboratory tests: Blood work and lab panels ordered beyond routine preventive screenings
- Durable medical equipment: Wheelchairs, CPAP machines, and other prescribed equipment are usually subject to coinsurance
- Out-of-network care: Many plans have higher coinsurance rates (40-50%) for out-of-network providers compared to in-network (20%)
Common Coinsurance Mistakes
Avoid these errors with coinsurance:
- Confusing coinsurance with copay: A copay is a fixed dollar amount ($25 per visit). Coinsurance is a percentage of the total bill (20% of $10,000 = $2,000). They are different cost-sharing mechanisms
- Forgetting about the out-of-pocket maximum: Coinsurance payments stop once you hit your annual out-of-pocket max. After that, insurance covers 100% of covered services for the rest of the plan year
- Not checking in-network vs. out-of-network coinsurance rates: Your plan may have 20% coinsurance in-network but 40% out-of-network. Always verify your provider is in-network before receiving care
- Ignoring coinsurance when comparing plans: A plan with 10% coinsurance costs you significantly less for a major medical event than a plan with 30% coinsurance, even if the premiums are similar
Side-by-side
Common Health Plan Coinsurance Structures
| Plan Type | Typical Coinsurance | Deductible Range | Premium Level |
|---|---|---|---|
| Platinum | 10% (you pay) | $0-$500 | Highest |
| Gold | 20% (you pay) | $500-$1,500 | High |
| Silver | 30% (you pay) | $2,000-$5,000 | Moderate |
| Bronze | 40% (you pay) | $5,000-$8,000 | Low |
| HDHP (HSA-eligible) | 20-30% (you pay) | $1,650-$8,300 | Lowest |
Key distinction: Higher metal-tier plans (Platinum, Gold) have lower coinsurance but higher premiums. Lower tiers (Bronze) have higher coinsurance but lower premiums. Choose based on your expected healthcare usage.
Coinsurance is the percentage of medical costs you share with your insurance company after meeting your deductible. In a standard 80/20 plan, you pay 20% of covered charges until reaching your out-of-pocket maximum. When comparing health plans, consider both the coinsurance rate and the deductible together to estimate your worst-case annual costs. Always use in-network providers to benefit from the lower coinsurance rate.
Common questions
Frequently asked questions
What does 80/20 coinsurance mean?
In an 80/20 plan, your insurance company pays 80% of the allowed amount for covered services and you pay the remaining 20%, after you have met your annual deductible. This is the most common coinsurance split for employer-sponsored health plans. Your 20% coinsurance payments count toward your annual out-of-pocket maximum.
Does coinsurance apply before or after the deductible?
Coinsurance applies after you have met your deductible. Until you reach your deductible amount, you pay 100% of covered costs (except for services with flat copays or preventive care, which may be covered before the deductible). Once your deductible is met, you begin sharing costs with your insurer through coinsurance.
Is lower coinsurance always better?
Lower coinsurance means you pay less per service, but plans with lower coinsurance typically charge higher monthly premiums. If you rarely need major medical care, a plan with higher coinsurance and lower premiums may cost less overall. If you have ongoing health needs or expect surgery, lower coinsurance provides better cost protection.
Evidence you can inspect
Sources and further reading
Use these links to check the underlying definition, rule, dataset, or consumer guidance. External pages can change after publication.