What Does It Mean When Health Insurance Pays 80% After Deductible?

Health insurance plans often have cost-sharing features like deductibles, copayments, and coinsurance to help split covered medical costs between you and your insurance company. One common coinsurance split is 80/20, which means your health plan pays 80% of the allowed amount for covered services after you meet your deductible. But what exactly does this 80/20 coinsurance split mean for your out-of-pocket costs?

This article will explain:

• How deductibles, copays, and coinsurance work
• What 80/20 coinsurance means
• Examples of how 80/20 plans cover costs
• How to estimate your potential out-of-pocket costs
• Tips for choosing the right coinsurance split

How Deductibles, Copays, and Coinsurance Work

Before diving into 80/20 coinsurance specifically, it helps to understand how common health insurance cost-sharing features work:

Deductibles – This is a fixed dollar amount you must pay out-of-pocket for covered medical services before your insurance kicks in. For example, if your deductible is $1,000, you pay 100% of medical costs until you reach $1,000. Then coinsurance applies.

Copayments (copays) – This is a flat fee you pay for certain services, like a $20 copay to see your primary care doctor. Copays don’t apply toward your deductible.

Coinsurance – After meeting your deductible, this is the percentage of costs you pay for covered services. For example, if you have 20% coinsurance, your plan covers 80% of the bill.

The key thing to note is you must meet your deductible first before coinsurance applies. Some plans also have copays for certain services that bypass the deductible.

What Does 80/20 Coinsurance Mean?

An 80/20 coinsurance split is common for health plans. Here’s what it means:

• Your plan pays 80% of the allowed amount for covered medical services after you meet your deductible.

• You pay the remaining 20% as your share of covered costs. This is your coinsurance.

For example, say you have an 80/20 plan with a $1,000 deductible. You have a hospital stay that costs $5,000 total. Here’s how the cost would be covered:

• You pay the first $1,000 to satisfy your deductible.

• Your plan pays 80% of the remaining $4,000 ($3,200).

• You pay the 20% coinsurance on the $4,000, which is $800.

• Your total cost for this hospital stay would be $1,000 (deductible) + $800 (coinsurance) = $1,800.

So in this example, your total out-of-pocket cost with 80/20 coinsurance is much less than the full $5,000 hospital bill. This demonstrates how the cost-sharing protects you from very high medical expenses.

Examples of 80/20 Plan Coverage

Here are few more examples to understand how 80/20 plans cover costs for different medical services:

Doctor Visit with $30 Copay

• Allowed amount for visit: $125
• You pay: $30 copay
• Plan pays: $95
• Your cost is only the copay since copays are paid before the deductible.

Prescription Drug Claim

• Cost of prescription: $200
• Allowed amount: $100
• You pay: $20 (20% coinsurance of $100)
• Plan pays: $80
• Your cost is coinsurance since prescriptions apply to deductible.

Outpatient Surgery

• Surgery cost: $5,000
• Allowed amount: $4,000
• You pay: $1,000 (remainder of deductible) + 20% of $4,000 = $800
• Plan pays: 80% of $4,000 = $3,200
• Your cost is deductible + coinsurance since this is major care.

As you can see, 80/20 coinsurance applies in different ways depending on the service, deductible phase, and whether copays or coinsurance covers the service.

How to Estimate Potential Costs

When shopping for health insurance, it helps to estimate your total potential costs with an 80/20 plan. Here are some tips:

• Know your expected annual medical costs based on last year’s claims.

• Understand the plan’s deductible and your progress toward meeting it.

• For coinsurance, multiply your expected costs by 20% to estimate your share.

• Add up deductibles, copays, and coinsurance amounts for your total potential expense.

• Compare plans with higher and lower coinsurance rates to find the right balance of premiums and out-of-pocket costs.

Online cost calculators can also help you estimate expenses for 80/20 and other coinsurance rates.

Choosing the Right Coinsurance Rate

The advantage of coinsurance over copays is your costs are proportional to the services received. You also get protection from very high medical bills after meeting your deductible. But how do you choose the right coinsurance split?

If you expect low medical spending, a higher coinsurance rate (like 30%) paired with a lower premium may save you money overall. You benefit from the lower premiums and likely won’t hit the out-of-pocket maximum.

If you expect high medical spending, a lower coinsurance rate (like 10% or 20%) ensures your costs stay more manageable if you require extensive medical care. The tradeoff is you pay a higher premium.

Evaluate your expected healthcare needs and expenses. In general, lower coinsurance rates benefit those with chronic conditions or unpredictable care needs. Healthier individuals may save with slightly higher coinsurance and lower premiums.

Understanding Your Out-of-Pocket Maximum

One other important benefit with 80/20 plans is that your overall out-of-pocket costs are capped each year by the out-of-pocket maximum. This is the most you’ll pay in total for deductibles, copays, and coinsurance.

For example, if your out-of-pocket max is $5,000, once your total cost-sharing for the year hits $5,000, the plan pays 100% of covered services. This protection is invaluable for those with significant medical expenses.

Just know that the out-of-pocket maximum doesn’t include your monthly premium payments. But all other cost-sharing counts toward this limit to prevent excessive spending.

When Are You Responsible for the Entire Bill?

While coinsurance protects you from big bills, there are still cases where you may be responsible for paying 100% of charges:

• If a service isn’t covered – For non-covered benefits, the insurance plan won’t pay anything. This is important to understand.

• When using out-of-network providers – Out-of-network coinsurance may be 50-60% rather than 20%. The allowed amounts are also usually lower.

• If you haven’t met the deductible – The deductible phase comes first before any coinsurance applies.

• With benefit limits – Some plans limit things like physical therapy, chiropractic care, etc. You pay 100% after exceeding limits.

Always check your plan details to avoid situations where you’re responsible for the entire bill. The good news is the 80/20 coinsurance will provide significant financial protection for major covered medical care once you’ve met your deductible.

Wrap Up

• An 80/20 health insurance plan covers 80% of allowed amounts for covered services after your deductible is satisfied.

• You pay the remaining 20% as your coinsurance share.

• This split helps limit your costs for expensive medical care.

• Your total out-of-pocket costs are capped each year by the plan’s maximum.

• Look for the right coinsurance rate based on your expected healthcare utilization and budget.

Knowing how the 80/20 cost-sharing works allows you to accurately estimate your potential expenses. This ensures you choose an optimal health plan.