Coinsurance is a concept often used in health insurance plans. When selecting the common 20/80 coinsurance on a policy, this basically means the insurer would pay 80% and the insured will pay 20% of the health expense once the deductible has been paid.

So lets use an example of an insured individual (Joe) with a $1000 deductible and a coinsurance of 20/80.  If Joe visits the emergency room and racks up a $6000 hospital bill, how will this expense be handled?  With the deductible being $1000, this amount will need to be paid along with 20% ($1000) of the remaining amount. The insurer will then pay 80% ($4000) of the balance left over.

Even though $2000 seems like quite a bit to pay out-of-pocket for a health emergency, it beats having to pay the entire $6000 fee, or be stuck with the bad mark on your credit record.

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