Cost sharing: a health insurance term

Cost-sharing refers to the patient’s portion of costs for healthcare services covered by their health insurance plan. A patient is responsible for paying cost-sharing amounts out-of-pocket. Cost-sharing can include a deductible, copayment, and/or coinsurance. Sometimes it’s a combination of all three. Cost-sharing is part of the benefits that you receive from your health plan.

Your health insurance plan will pay its cost-share for doctor and hospital visits, prescription drugs, wellness care, and medical devices. But there are some services that are not a part of cost sharing.

Are premiums part of cost-sharing? 

A premium is billed by your health insurance. It is when a policy holder pays for health coverage. A policyholder may be this cost alone or may split the cost with his or her employer. Policyholders must pay premiums each month, regardless of if they visit a doctor or use any other healthcare service. Premiums are out-of pocket expenses. But are not are not  part of cost- sharing. 

Types of Cost Sharing  

Copay — A fixed amount a person pays for qualifying types of services, such as office visits, specialist visits, prescription drugs or other procedures.  

For example, a member may have a $25 copay for an office visit with a primary care physician and a $40 copay for a specialist. All copays are fixed and detailed in the Summary or Schedule of Benefits (SOB) at the beginning of the plan. Copays can be charged before and/or after a person has reached his or her deductible. 

Deductible — The amount policyholders pay for covered services before the insurance company begins to pay. For example, if a member has a $2,000 deductible, that person will pay 100 percent of all eligible expenses until the bills total $2,000. Once the deductible is reached, the insurance carrier’s cost sharing changes. Some members may still be required to pay copays or coinsurance after reaching the deductible.  

See Also: an article on embedded vs non-embedded deductibles. 

Coinsurance — An amount paid after a person has met his or her deductible. It is a percentage of the allowed amount for services.  

For example, if a member has a 20% coinsurance on the plan, that person is responsible for 20% of the cost of any services. The insurance company will cover the rest.  

In practice, that works like this: The allowed amount for lab work is $100. If the member already met, or paid, the deductible, he or she will owe 20% of the allowed amount of $100, or $20. If the member has not met, or paid, the deductible, he or she will owe the full amount of $100.  

You may not have coinsurance, if you do not see it listed on your plan. Not all plans have coinsurance. 

Why cost sharing terms matter

It’s important you understand your benefits when you receive your plan documents. All health insurance plans come with a summary of benefits, which includes information on all copays, deductible and/or coinsurance. If you have additional questions about your plan, it’s best to contact the health insurance company directly. 

You may find contact information for the carrier on your member ID card.