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Health Insurance Basics

Cost Sharing Decoded: Understanding Health Care Basics

June 23, 2017

Cost sharing. It’s not something many people think about regarding their health plan, but it’s the very basic idea that makes insurance possible. Cost sharing lowers costs for everyone. There are three basic types of cost sharing everyone needs to understand: deductibles, copayments and coinsurance. Here’s your guide to understanding these basics so you can plan your care better.

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When you have a roommate, you split the rent and utilities.

It’s the same with cost sharing. When you go to the doctor, you pick up part of the cost, and your health plan picks up the rest. Of course, how much you pay depends on what kind of plan you have and how much you use it.

So why do you share the cost with your health plan? It’s a way to lower monthly payments for everyone.

There are Usually Three Types of Cost Sharing:
  • deductibles
  • copayments
  • coinsurance

When you pay a deductible, copayment or coinsurance, you’re paying part and your health plan is paying part – you’re sharing the cost.

Deductible

What you pay before the plan starts to pay for covered services.

Copayment

A fixed dollar amount you pay for covered services, like a $25 copay when you visit your doctor.

Coinsurance

This is your percentage of the costs for the covered services, once you reach your deductible. For example, you may have to cover 30% of a lab test. The plan would pay the other 70%.

The Bottom Line

Cost sharing helps keep consumer costs down

Keep in mind that monthly payments go up and down based on how your deductible, copay and coinsurance are set up.

It’s important to choose a plan that meets your health care needs. You can go to Healthcare.gov to browse plans offered in your state and compare details such as cost sharing charges under various plans, and find a Summary of Benefits and Coverage (SBC) for each plan.