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What is coinsurance?

Health Benefits • November 1, 2023 at 8:44 AM • Written by: Elizabeth Walker

If you have health insurance—whether through your employer or a policy you purchased on the individual market—it’s essential to know specific health insurance terminology. This can be confusing at first, but learning standard terms will help you understand what medical services your plan covers and how much you’ll pay out-of-pocket for care.

One common term that you may come across is coinsurance. Knowing your coinsurance rate will help you choose a plan during the open enrollment period and budget for any expected out-of-pocket costs. But what exactly does it mean?

In this article, we’ll explore what coinsurance is, how it works, and how your employer can help you save on coinsurance and other healthcare costs by offering an integrated health reimbursement arrangement or health stipend.

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What is coinsurance?

Coinsurance is the percentage of costs you must pay for a covered healthcare service after meeting your annual deductible. Your annual deductible is the amount you must pay out-of-pocket before your health insurance starts to pay. Assuming your plan has coinsurance, once you meet your deductible, your insurance company pays a portion of your remaining healthcare costs until the plan year ends, and you’ll pay the remaining portion. Essentially, you and your insurer have “co-responsibility” over your medical expenses.

Your insurer tracks how much you’ve paid toward your deductible throughout the plan year. After a healthcare service, your insurance company sends you an explanation of benefits (EOB).

EOBs aren’t bills; they’re medical claim summaries. They show the service date, the service you received, deductible accumulations, the amount your plan paid, how much you’re responsible for paying, and appeal information. They also show the cost for any medical services you received that your plan doesn’t cover.

If you’ve already met your deductible, your EOB will show how much coinsurance you owe for the service. You’ll pay your coinsurance amount directly to your physician, hospital, or pharmacy like you would for a copayment.

How does coinsurance work?

Coinsurance rates are typically a fixed ratio, so you’ll pay the same percentage on a covered expense every time. Many insurance companies use an 80/20 coinsurance rate. This means your insurance company will pay 80% of the service’s cost, and you’ll pay the remaining 20%. But coinsurance rates vary by policy, so check your plan documents to see your specific rate.

You'll need to know the service's allowed amount to determine how much coinsurance you’ll owe on a specific service. The allowed amount, also called a negotiated rate or payment allowance, is the maximum amount your insurance company has agreed to pay for a service. You can find this information in your plan descriptions. If your medical service or item costs more than the allowed amount, such as if you receive out-of-network care, you’ll pay the difference.

Once you know the allowed amount and actual cost for a service, you can calculate your coinsurance.

Below is an example of how to calculate your coinsurance fee for a covered service:

Your plan’s coinsurance rate

Allowed amount for an office visit

Actual cost of the office visit

The amount your insurer will pay

The amount you must pay




70% (or $70)

30% (or $30)

You’ll continue to use coinsurance cost-sharing for your covered services throughout the rest of the plan year (in most cases) because you’ve already met your annual deductible.

Coinsurance charges also count toward your out-of-pocket maximum. This is the maximum amount you’ll pay for covered health services during your plan year. Out-of-pocket maximums vary from plan to plan, but deductibles and coinsurance count toward it. Once you reach the maximum limit, your insurer will cover 100% of the remaining costs.

Remember that out-of-network care may have higher coinsurance percentages than in-network services, or your insurance company may not cover out-of-network care. Out-of-network services typically don’t count toward your maximum out-of-pocket limit either. So be sure to get care from an in-network provider as often as possible to reduce your medical bills.

If you have an individual health insurance plan from the Health Insurance Marketplace or state exchanges, coinsurance amounts can differ by the metal tier of your plan. The following are coinsurance averages for Affordable Care Act plans, though they can differ.

ACA plan type

Average coinsurance rate

The average amount the insurer pays

The average amount policyholders pay

















What is the difference between coinsurance and a copayment?

Coinsurance and copays are cost-sharing features that health insurance companies use to spread risk among their members. While they’re often mistaken for the other, they have their differences.

As mentioned earlier, coinsurance is the percentage of costs you're responsible for paying after meeting your deductible. In contrast, a copayment, or copay, is a set amount of money you must pay for a service or item, regardless of whether you've met your deductible. They’re typically due at the time of service and don’t usually count toward your out-of-pocket maximum.

Your copay amounts will vary by plan. Within a plan, copays can also vary by the type of service or item you receive. For example, you may have to pay a $200 copay for an emergency room visit, a $30 copay for primary care doctor visits, and a $10 copay for prescription drugs.

Even if you only pay small copays occasionally, they can add up over time and become expensive. So, like coinsurance and the out-of-pocket maximum, check a plan’s details before you enroll if you need frequent medical care to keep your costs down.

How an integrated HRA or a health stipend can help you with your coinsurance costs

If you have a group health plan through your employer, you may need help paying for all your out-of-pocket expenses. Even if you have a low-deductible health plan (LDHP) or a no-deductible plan, you’ll still have to pay coinsurance expenses and other out-of-pocket costs.

If your employer is updating your company’s benefits package and asks for employee input, suggest an integrated HRA or taxable health stipend. Let’s go over both benefits below to give you an idea of how each can meet your needs.

Integrated HRA

An integrated HRA, also called a group coverage HRA (GCHRA), is an employer-owned health benefit that supplements a group health plan by reimbursing employees tax-free for out-of-pocket medical expenses the group policy doesn’t fully cover. You must enroll in your employer’s group health plan to participate in a GCHRA.

With a GCHRA, your employer can reimburse you for your deductibles, coinsurance, copayments, and other qualified medical expenses, saving you money on your healthcare costs. But you can’t receive reimbursements for your group plan premiums.

GCHRAs are flexible and customizable. They can work alongside any group healthcare plan, and the benefit will stay in place if your employer changes insurance providers. Employers can offer as much monthly allowance for reimbursement as they want because there are no maximum annual contribution limits, unlike health savings accounts (HSAs). They can even offer different allowance amounts to different employee classes for greater personalization.

If your employer is looking for a way to boost your health benefits, a GCHRA can help you pay for your coinsurance and other healthcare expenses so you pay less out of pocket and have greater control over your budget.

Taxable health stipend

Lastly, you can recommend a health stipend. With a stipend, an employer provides their employees a fixed amount of money to help them pay for out-of-pocket healthcare costs. You’ll typically receive stipend money added to your paycheck as taxable income regularly, such as monthly, quarterly, or annually.

Stipends are flexible, so your employer can determine how much allowance to give to you to use on healthcare. They’re not a formal benefit, so they have fewer regulations and compliance issues. You can use your stipend money on your group health insurance premiums, coinsurance, copays, and other eligible expenses. Your employer can even offer a health stipend alongside a GCHRA for even greater coverage.

Even though stipends are taxable, they’re a flexible and straightforward way to pay for your medical costs, so you don’t have to delay necessary treatment or blow your budget.


Understanding how coinsurance works is an essential first step when choosing the right health insurance policy for you, your family, and your budget. If you have a health plan with a high deductible or coinsurance rate, you must prepare for the out-of-pocket expenses. So, before enrolling in a health plan, review the policy details carefully so you don’t receive a surprise bill.

Luckily, alternative health benefits are rising in popularity. If your employer offers you a GHCRA or taxable stipend as part of your compensation package, take advantage of it as an affordable way to afford your coinsurance payments and other medical costs throughout the year.

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Elizabeth Walker

Elizabeth Walker is a content marketing specialist at PeopleKeep. She has worked for the company since April 2021. Elizabeth has been a writer for more than 20 years and has written several poems and short stories, in addition to publishing two children’s books in 2019 and 2021. Her background as a musician and love of the arts continues to inspire her writing and strengthens her ability to be creative.