Coinsurance  – Another Rip-off in Health Care

Let’s say that a health policy is advertised as follows: 

• Deductible = $7000, 
• Coinsurance = 20%, 
• Out of pocket maximum = $15,000

Fast forward — you have a serious illness, and wind up with a $40,000 hospital bill.

You pay the first $7,000, which is your deductible….

then you pay coinsurance –   20% of the remaining $33,000, or $6,600…..

finally, the insurer pays the remainder, which in this case is just $26,400.

I call this a $13,600 effective deductible for hospital stays.  

The insurance company is doing fine….after all, they only had to pay out $26,400 on a $40,000 claim.

The insured has paid $13,600 – and remember, that’s after forking over thousands of dollars in premiums over the years.

You probably bought health insurance because you could not afford a large hospital bill. 

Well, here’s a secret: you can’t afford $13,600 either!

Why do we allow this? 

Granted  coinsurance does make the policy a little cheaper, because you’re buying less insurance. 

But coinsurance forces patients to shoulder largely unpredictable  out-of-pocket costs — an approach that disproportionately harms those with the fewest resources and the greatest medical challenges. 

Coinsurance is not a one-time payment, but an ongoing financial responsibility throughout the policy period. Each time a covered expense is incurred, the policyholder is required to contribute their portion of the coinsurance.   

20% coinsurance  imposes the heaviest burden on those least able to bear it: patients with chronic conditions, rare diseases, or complex medical needs.

 Those defending coinsurance often argue it gives patients “skin in the game,” encouraging careful health care choices.

 Wrong!  This uncertainty can result in a sense of learned helplessness, particularly when patients are repeatedly unable to predict or control their health care expenses.

Two paths forward exist: 

#1. Banning coinsurance at the federal and state levels outright.

A complete ban would make out-of-pocket costs more transparent, predictable, and equitable. 

However, this would increase premiums, making coverage less affordable for some individuals and employers.  

#2. Making coinsurance more affordable through income-based adjustments. 

 Coinsurance could be adjusted for households using sliding scales based on ability to pay and considering factors like household income, size, assets, and medical expenses. 

While more complex to administer than uniform rates, even an imperfect adjustment would be more equitable than the current system.

Summary:

The Affordable Care Act has been caught in a death spiral since 2016, when  Congress repealed the individual mandate. 

This meant that healthy people ditched their health insurance, leaving the insurance pool full of  persons making claims. 

Insurers responded by gutting coverage, jacking up rates and deductibles, and tossing in high rates of coinsurance.

Were it up to me, there would be no deductibles or coinsurance at all for hospital care. The insurer would pay the entire claim. User fees for hospital care are cruel and unnecessary.

 Most wealthy countries do without them (other than minor fees like $50), and feel completely adequate.