Benefits and Claim Procedures: Health Coinsurance
As we saw in "Benefits and Claim Procedures: Health Insurance Co-pays and Deductibles: A Primer" there are many hoops you have to jump through before your insurance policy actually kicks in and starts paying benefits. In addition to co-pays and deductibles, another limitation in the sample individual health insurance policy we are examining is in the area of coinsurance.
Coinsurance, as it relates to a medical health insurance policy, is a provision under which the insurance provider and the insured person share costs incurred after the co-pays and deductibles are met, according to a specific formula or schedule. Once you have incurred sufficient out of pocket expenses to meet all your necessary co-pay and deductible limits, then the insurance company will begin applying their policy benefit formula to the remaining expenses you have incurred. This means they still will not be paying for everything.
As mentioned in an earlier article, this formula is, in our sample policy, referred to as the Company Insurance Percentage. The company insurance percentage is defined as the portion of covered expenses the insurance company will pay to--or on behalf of--an insured after the insured has assumed financial responsibility for three things:
- all co-pays that apply;
- all deductibles that apply;
- the amount of the insured coinsurance percentage that applies.
The "Insured Coinsurance Percentage" is the portion of the covered expenses that you are responsible for paying after co-pays and the deductibles are met. This is a percentage that is shown on the policy schedule, and, together with the company insurance percentage, they total 100%. The percentage is usually displayed in your policy as "80/20", "75/25", "70/30" "50/50". Some policies have no coinsurance provision.
Here is how it works: If you have incurred inpatient hospital expenses that exceed your co-pay and deductible obligations by $20,000 and your insured coinsurance percentage is 30%, then you will be obligated to pay, in addition to your co-pay and deductible amounts, $6,000 (30% of $20,000). The insurance company will be obligated to pay the remaining $14,000 (70%, the company insurance percentage).
Coinsurance Payment Schedules: Participating and Non-participating Providers
Look at the policy schedule for the breakdown on the percentages paid to doctors "inside your plan" (called participating providers) and those "outside the plan" (called non-participating providers) or not on the list of participating providers.
Here's what your policy schedule might look like: COINSURANCE PAYMENTS SCHEDULE – PARTICIPATING PROVIDERS
|A. Company Insurance Percentage||100%|
|B. Insured Coinsurance Percentage||0%|
COINSURANCE PAYMENTS SCHEDULE – NON-PARTICIPATING PROVIDERS
|A. Company Insurance Percentage||70%|
|B. Insured Coinsurance Percentage||30%.|
A "Participating Provider" is a hospital, doctor, surgery center, skilled nursing home or other licensed practitioner that has entered into an agreement with the insurance company to provide you with services at a discounted rate.
A "Non-Participating Provider" is also a hospital, doctor, surgery center, skilled nursing home or other licensed practitioner, but one which has not entered into an agreement with the insurance company to provide health care services to you under the policy at discounted rates.
The co-insurance percentages differ depending on whether your provider is listed in the network or works outside the network. In our sample policy, the health services were done by a doctor "inside the network" and hence the insured coinsurance percentage is 0%. In other words, you are not obligated to pay anything (after the co-pays and deductibles). The insurance company picks up the entire bill for the expenses for the services provided.
On the other hand, if your medical treatment is performed by an out-of-network doctor or other provider, under our sample policy you would be responsible for paying 30% of the bill after the copay and deductibles. That is the insured coinsurance percentage. The insurance company pays 70%, their company insurance percentage. Here is how this calculation works: Let's suppose you have $10,000 in medical expenses from Dr. Smith, an out-of-network doctor, after the deductibles and co pay. Of this bill, you would pay $3,000 (30%) and the insurance company would pay $7,000 (70%). This is true even for pre-certified treatment, i.e., treatment approved in advance by the insurer.
So, it is important, where possible, for you to make certain your treatment and services are being performed by doctors and facilities in the insurance company's network (i.e., the participating providers). Note, however, that even if your provider is in your insurance company's network, some policies still require you to pay a small or sometimes not so small co-insurance percentage. Check your own policy to be sure.
Relationship with co-pays and deductibles: The participating/non-participating division also rears its ugly head in the area of co-pays and deductibles. If, for example, you have elected our sample policy with a $2,500 co-pay for hospital stays, that is the co-pay that applies to participating provider treatment and services, i.e., treatment by doctors, hospitals, etc., in the insurance company's network. If treatment is performed by non-participating providers, i.e., those outside the network, the sample policy requires a higher co-pay of $3,250 before the insurance company will pay any benefits.
The distinction is even greater with deductibles. If you have elected a $5,000 calendar year deductible, which would apply to participating providers, you are subject to an additional $6,500 deductible for treatment performed by non-participating providers. These are two more reasons to make sure whenever possible that your treatment and services are provided by doctors and facilities in your insurance company's network.