In a health insurance policy, the coinsurance clause depicts the fixed percentage of costs of a covered healthcare service that you must pay after you've paid your deductible. For instance, if your healthcare policy document states that you must pay 20% of the medical bill as coinsurance, you are liable to pay this fixed percentage while your insurer will pay the remaining 80%.
This cost-sharing ratio lasts until you share your out-of-pocket maximum. The insurance company bears the related medical expenses thereafter. Coinsurance, vital to the overall scheme of health insurance, serves as a medium where healthcare costs are shared between the policyholder and the insurer.
What is coinsurance in health insurance?
Coinsurance in health insurance safeguards insurers against hefty claims. The coinsurance clause stipulates a fixed percentage, which is mentioned clearly in the policy document. This percentage aligns with the maximum out-of-pocket expenses you can incur annually before your insurance covers the rest. For instance, you get hospitalised, and the medical bill comes to INR 20,000. If your policy states that you must pay 20% of the total amount as coinsurance, you must pay INR 4,000 while your insurer will settle the remaining 80% (i.e., INR 16,000) of the billed amount.
Although the coinsurance percentage remains intact, policyholders must first meet their deductible before coinsurance applies.
Difference between Copay and Coinsurance
Copay in health insurance refers to expenses a policyholder has to bear as a fixed portion of the total costs for medical treatment. However, the remaining expenses are borne by the insurer. The policyholder must pay a fixed amount or percentage of the total cost.
Copay and coinsurance differ in various aspects.
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Aspect
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Copays
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Coinsurance
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Payment Frequency
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Requires payment for each doctor visit or prescription fill.
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Payment for services and medications is activated once your deductible has been met.
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Payment Type
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Involves a fixed, predetermined amount.
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The actual amount varies, but the percentage of expenses a policyholder must pay remains fixed as per the policy’s coinsurance clause.
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Deductible Impact
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It can count towards your deductible in some instances.
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Only applies after your deductible has been met.
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Payment Process
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Payments are made directly at the time of service.
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The insurer issues bills and requires direct payment. Following this, you'll receive an Explanation of Benefits (EOB) detailing your financial obligations.
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Differences between Coinsurance and Deductible
A deductible is a fixed amount a policyholder has to pay before the insurer starts contributing towards the medical treatment. For example, if your policy necessitates a deductible of INR 5000, you will have to bear treatment expenses of up to INR 5000 before the insurer starts paying.
Deductibles differ from coinsurance payments on a few criteria:
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Aspect
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Coinsurance
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Deductible
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Payment Timing
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Paid after the policyholder pays the deductible
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Paid before insurance coverage activation
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Amount
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Varies based on the total cost of covered services
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A fixed sum you must pay before insurance coverage kicks in
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Risk involved
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Involves more risk as the policyholder needs to pay a fixed percentage of the treatment costs, which can be a considerable amount if the medical bill is steep
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No liability even if the treatment costs are substantially high, as the policyholder pays a fixed amount as per the policy
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Payment constraint
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Paid each time a claim is made
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Payment for deductibles is made only once in a policy year
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Conclusion
Comprehending the notion of coinsurance in health insurance is comparable to working with your insurer to manage medical costs. Coinsurance in health insurance ensures that financial responsibilities are distributed fairly by splitting the expenses after you pay the deductible.
Choosing a comprehensive health insurance policy with coinsurance features is smart if you want to maintain your financial stability and be ready for medical emergencies. For financial security and peace of mind, embrace this team-based approach to healthcare coverage.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the relevant industry. It is advised to verify the relevance of the data and information before taking any major steps. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.