What Is 80% Coinsurance and How Does It Work?
Decode 80% coinsurance. Grasp how this key health insurance term shapes your healthcare costs and financial obligations.
Health insurance helps manage medical care costs. For regular payments, an insurance company covers a portion of healthcare expenses, involving cost-sharing between the insured and insurer.
Understanding Coinsurance
Coinsurance is a type of cost-sharing in a health insurance plan. It’s a percentage of a covered healthcare service’s cost that an insured person pays after their annual deductible is met.
An “80% coinsurance” plan means the health insurance company pays 80% of covered medical expenses, and the insured individual pays the remaining 20%. This percentage applies to the “allowed amount,” which is the maximum amount a plan will pay for a covered service.
How 80% Coinsurance Works with Your Plan
80% coinsurance applies only after the insured person has paid their annual deductible. The deductible is a predetermined amount paid out-of-pocket for covered medical services before the insurance plan contributes. For instance, if a plan has a $2,000 deductible, the policyholder pays the initial $2,000 of eligible medical expenses.
Once the deductible is met, 80% coinsurance applies to subsequent covered medical costs. The insurance company covers 80% of each eligible bill, and the insured individual pays 20%. This continues until the out-of-pocket maximum is reached.
The out-of-pocket maximum is a ceiling on the total amount an insured person will pay for covered services within a plan year. This limit includes payments towards the deductible, coinsurance, and copayments. Once accumulated expenses reach this maximum, the plan covers 100% of all further covered medical costs for the rest of that benefit period. For example, the out-of-pocket limit for a Marketplace plan in 2025 cannot exceed $9,200 for an individual.
Real-World Scenarios and Cost Implications
Consider a health insurance plan with a $2,000 deductible and a $7,000 out-of-pocket maximum. If a policyholder needs a $500 medical procedure early in the year and hasn’t met their deductible, they pay the full $500. This contributes towards their $2,000 deductible.
Later, if the same policyholder needs a $1,000 diagnostic test and has already paid $1,500 towards their deductible, they first pay the remaining $500 to meet the deductible. For the remaining $500 of the diagnostic test cost, 80% coinsurance applies. The policyholder pays 20% ($100), and the insurer covers 80% ($400). Their total out-of-pocket for this service would be $600 ($500 deductible + $100 coinsurance).
For a major medical event, like a hospitalization with an allowed cost of $25,000, assume the policyholder hasn’t met any deductible. They first pay the $2,000 deductible. The remaining $23,000 is subject to 80% coinsurance. The policyholder’s 20% share is $4,600.
The total out-of-pocket expense for the policyholder would be $2,000 plus $4,600, totaling $6,600. Since $6,600 is below the $7,000 out-of-pocket maximum, the policyholder pays the full $6,600. If the total had exceeded the $7,000 maximum, their responsibility would cap at $7,000, with the plan covering all additional costs for the year.