Massachusetts Health & Accident Insurance Practice Exam

How does coinsurance work?

1. The insurer pays a fixed dollar amount

2. It is a sharing of expenses between insurer and insured

3. The insured covers all expenses after the deductible

4. It is only used for prescription drugs

The correct answer is: It is a sharing of expenses between insurer and insured

Coinsurance is a concept in health insurance that represents a sharing of expenses between the insurer and the insured. Under a coinsurance arrangement, after the insured has met their deductible, both the insurer and the insured will pay a percentage of the remaining medical costs. This means that for covered expenses, the insured typically pays a certain percentage, while the insurer pays the rest. For example, if the coinsurance is set at 20%, the insured would be responsible for 20% of the costs, and the insurer would pay 80%. This system helps to keep overall healthcare costs down and encourages insured individuals to be more mindful of their healthcare spending, as they are financially responsible for a portion of the costs. It also aligns the interests of both parties, leading to a shared responsibility for managing healthcare expenses. The other options do not accurately describe the concept of coinsurance. A fixed dollar amount describes copayment rather than coinsurance. The statement that the insured covers all expenses after the deductible misrepresents coinsurance, as that scenario would imply total liability falls on the insured, which is not how coinsurance operates. Lastly, while coinsurance can apply to prescription medications, it is not limited to them; it is applicable across a variety of healthcare services and