What do "deductibles" and "coinsurance" have in common?

Deductibles and coinsurance are both mechanisms used in health insurance plans that involve shared costs between the insurer and the insured. They are designed to manage expenses more effectively and promote responsible use of healthcare services.

A deductible is the amount that an insured individual must pay out-of-pocket before their health insurance starts to cover costs. For example, if a plan has a deductible of $1,000, the insured will pay for all medical expenses up to that amount. After meeting this threshold, the insurance coverage kicks in.

Coinsurance, on the other hand, is the percentage of costs that the insured is responsible for paying after the deductible has been met. For instance, if a plan has a coinsurance rate of 20%, the insurance company will cover 80% of the costs of a medical service, while the insured will pay the remaining 20%.

Both of these terms represent the idea of cost-sharing, which is fundamental in health insurance. They are crucial in letting insured individuals share some responsibility for their healthcare costs, thus encouraging them to consider the cost of services before consuming them. This helps to lower overall healthcare costs and ensures that both the insured and the insurer have a vested interest in managing healthcare expenditures effectively.