Health plan coinsurance is often misunderstood, but it's part of most health insurance plans. It's one of the ways that health insurance companies keep their costs down by putting off part of the cost of medical care to their customers. Plans with high coinsurance rates may be more expensive for customers who frequently receive health care treatment, but health insurance rates are typically lower for high-rate plans. Before buying any type of health insurance plan, it's important to understand coinsurance and how it can change a policy.

Many health insurance buyers confuse health plan coinsurance with co-payments, but these terms are markedly different. Co-payments are set amounts of money paid after a doctor's visit or when purchasing medication. A co-payment is somewhat simpler than coinsurance because it's a fixed amount. Co-payments might vary depending on whether generic or name brand medication is used, but they're usually printed right on a health insurance policy card. Health plan coinsurance is somewhat more complicated, because it's a percentage – an individual might pay 5% of the cost of a doctor's visit while his insurance plan pays for the rest of the costs. This keeps costs down for the health insurance company and provides an incentive to keep patients from visiting the doctor's office unnecessarily. It's essentially a form of deductible, much like co-payments are a type of deductible, but coinsurance is much more complex. Coinsurance can even vary by type of treatment. The coinsurance for diagnostic tests and medication can be very different than the coinsurance rates for a standard physician's visit, for instance, all depending on the health insurance plan.

Coinsurance can be expensive in many situations, as even a low percentage of a complex medical treatment schedule can be thousands of dollars. Most health insurance plans place a maximum limit on co-payments, so the insured won't pay more than a certain amount. This is detailed in the buyer's health insurance policy. Coinsurance maximums are very important, particularly when a patient has a critical illness, so this is a crucial part of a policy to read when buying health insurance. Ideally, coinsurance maximums should be at an affordable level if the patient needs multiple doctor's visits and treatments within a short period of time.

Coinsurance counts towards an insurance policy's out-of-pocket expense cap. Once the cap is reached, the insurance company will pay for all of a patient's medical bills (except for co-payments, depending on the plan). By checking out-of-pocket expense caps, coinsurance rates and maximums, health insurance buyers can make sure that they're buying an affordable plan.