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What is Coinsurance under Obamacare?

Here’s a hint: coinsurance has nothing to do with coins. The word is pronounced “co-insurance” and it’s a term that confuses a lot of people. According to a 2011 analysis by eHealth Inc., only one in four (25%) Americans can confidently define or explain the term “coinsurance.”

There are a lot of technical and potentially confusing terms that you may see when shopping for Obamacare health insurance coverage or reviewing your medical bills, and it is important to understand these terms before choosing a health plan.

This article will address how coinsurance works under Obamacare, and what you might expect to pay for coinsurance when you receive medical care under an Obamacare-compliant health insurance plan.

What is coinsurance under Obamacare?

Coinsurance is a form of cost-sharing under Obamacare, similar to copayments and deductibles. Coinsurance is usually described as a percentage of the cost of a covered medical service. This is something you pay out of pocket when you receive covered medical care. Though rules will differ under different health insurance plans, you will typically need to fulfill your annual deductible before coinsurance comes into play.

Here are a couple simple examples that might help you better understand coinsurance:

  • If your coinsurance requirement is 25% under your Obamacare health plan and your office visit is $100, your 25% coinsurance payment would be $25.
  • If your coinsurance requirement is 20% under your Obamacare health plan and your office visit is $200, your 20% coinsurance payment would be $40.

Coinsurance versus other forms of cost-sharing under Obamacare

Not all medical services are subject to coinsurance, and not all Obamacare plans come with a coinsurance requirement. Generally speaking, more expensive or higher metal-level plans (like platinum plans) may not require you to pay coinsurance.

Coinsurance should not be confused with other form of cost-sharing such as copays or deductibles.

  • Copays
    • A copay, or copayment, is usually a flat fee that you pay when visiting the doctor’s office or when picking up your prescriptions at the pharmacy.
  • Deductibles
    • Your annual deductible is a set dollar figure that you are responsible for when you receive most non-preventive medical services, until the deductible is met. Once your deductible is met, your health plan begins to pay for qualifying covered health expenses.
    • When choosing a health plan, be aware of the difference between high and low deductible plans and what that may mean for your out-of-pocket costs.
    • Coinsurance usually does not apply to your annual deductible though it will apply to your annual out-of-pocket limit.

The amount of your coinsurance can vary widely from one plan to another. Some plans may not have coinsurance at all. Coinsurance may apply to a broad variety of medical services under other plans.

Do I pay coinsurance when I visit the doctor for preventive care?

Under Obamacare, many preventive care services are available with no out-of-pocket cost. Under the Affordable Care Act, (which is the more official name for the Obamacare law) all health insurance plans are required to provide you with coverage for a package of services known as “essential health benefits.”

The 10 essential health benefits under Obamacare include: ambulatory patient services, emergency services, hospitalization, maternity care, mental health and substance use disorder services, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness services and chronic disease management, and pediatric services. While all Obamacare plans provide coverage for these medical services, some may require you to pay coinsurance.

However, many preventive care services such as annual checkups, immunizations, and specific health screenings will not require you to pay coinsurance, copays, or annual deductibles. When shopping for coverage, pay attention to the various forms of cost-sharing defined under various plans, and understand when they apply.

Are prescription drugs subject to coinsurance under Obamacare?

Under Obamacare, most consumers will share the burden of costs for prescription medications just as they would for other health care services. Typically, you’ll have a copay for prescription drugs, but it is also possible that you may face deductible or coinsurance charges for certain drug expenses.

Will my Obamacare subsidy affect the amount of my coinsurance?

Obamacare offers premium tax credits to customers who qualify. Those earning no more than 400% of the federal poverty level (about $47,000 for a single person or $97,000 for a family of four in 2016) may be eligible. The dollar value of the subsidy will vary depending on your income and the cost of coverage in your area.

These subsidies are generally applied toward the monthly premium that you pay for coverage. However, if you earn less than 250% of the federal poverty level in your area, you may also be eligible for an additional form of subsidy assistance that can effectively lower out-of-pocket costs associated with cost-sharing expenses.

Does Obamacare require you to pay coinsurance?

Not all plans require coinsurance under Obamacare, though many do, and the amount of coinsure you face can vary widely from one Obamacare plan to another. Some plans may require you to contribute 20% or 30% coinsurance for certain medical services. A couple examples:

  • If an Obamacare plan you’re considering says that hospitalization is covered with 20% coinsurance, that means you will pay 20% of the allowed charge for a typical hospital bill.
  • If the medical benefits in question are covered with 30% coinsurance, that means you pay 30% of the allowed charge for the benefits.

Is there a limit to my coinsurance under Obamacare?

Before the Affordable Care Act, there were fewer restrictions to out-of-pocket costs, but now the Affordable Care Act limits how much an individual will pay out-of-pocket each year or within a policy period. This includes a limit to coinsurance.

When you reach what is called your maximum out-of-pocket limit for the year, any covered medical services that you receive during the remainder of the year will be covered with no cost-sharing from you. That means no copayments, no deductibles, and no coinsurance. With some plans, the maximum out-of-pocket amount will be the same as your annual deductible. Plans that utilize coinsurance, however, typically have a maximum out-of-pocket limit that is higher than the annual deductible.