Cost Sharing in Health Insurance & Facets-Part I

Cost sharing in a health insurance plan means the share of costs the policy-holder pays out of his own pocket for covered benefits in a policy period. This generally includes deductible, coinsurance, copay, out-of-pocket maximum. Typically cost sharing does not apply to Premiums, uncovered costs, or balance billing.

When a policy holder enrolls himself in a health insurance plan, the concerned health insurance company sends the policy holder Benefit Summary of the health plan. From this Benefit Summary, the policy holder knows what are covered and non-covered. It will also say what are deductible, coinsurance, copayment and out-of-pocket.

Copay generally means the policy holder's cost for a doctor or a hospital visit. Deductible means the policy holder's cost before the health plan starts to pay. Coinsurance means policy holder's cost sharing after the deductible is met. Out-of-pocket maximum means the maximum amount the policy holder has to pay for covered services in a plan year. After he spends this amount on deductibles, copay, and coinsurance, his health plan pays 100% of the costs of covered benefits.

Premium means the amount the policy holder pays for his health insurance every month. Balance Billing means a bill that the provider  bills for the difference between the provider’s charge and the allowed amount. For example, if the provider’s charge is $200 and the allowed amount is $150, the provider may bill the policy holder for the remaining $50. This $50  bill is the example of balance billing.  

I will give  one very simple example of cost sharing in Part II . Complex examples will be given in some separate postings.