Massachusetts Health & Accident Insurance Practice Exam

What does it mean for expenses to be shared in a coinsurance arrangement?

1. The insurer covers 100% of the costs after the deductible

2. The insured pays a fixed amount regardless of the total cost

3. Specific percentages of expenses are split between the insurer and the insured

4. The insured is responsible for the first $500 of all costs

The correct answer is: Specific percentages of expenses are split between the insurer and the insured

In a coinsurance arrangement, sharing expenses refers to the way both the insurer and the insured contribute to the costs of covered services after the deductible has been met. Specifically, this means that certain percentages of expenses are divided between the two parties. For example, if a policy has an 80/20 coinsurance structure, the insurer would cover 80% of the expenses while the insured would be responsible for the remaining 20%. This arrangement helps to balance the financial responsibilities of both the insurer and the insured, promoting the prudent use of healthcare services while also providing protection against high medical costs. The other options do not accurately reflect the nature of coinsurance: one suggests that the insurer covers all costs after a deductible, which isn't the case in a coinsurance setup; another indicates a fixed amount paid by the insured, which describes a copayment rather than coinsurance; and the last option implies a specific dollar amount the insured is responsible for, which again does not align with the shared percentage concept of coinsurance.