13.3.2 Coinsurance
The coinsurance is that portion of the balance due that each participant pays. The insurer pays their fair share and the insured pays his/her fair share. Typically, the coinsurance amount is an 80/20 split once the deductible has been satisfied.
Now let's see how the stop-loss feature comes into play wherein the insurer will pay 100% of certain covered expenses.
Stop-Loss Feature
Between deductibles and coinsurance, the risk of high medical expenses can still be a gigantic risk for the insured. The stop-loss feature in major medical contracts serves to help reduce these costs.
The stop-loss feature places a limit on the maximum out-of-pocket expenses an insured must incur for health care, above which the policy pays 100% of the remaining eligible expenses.
The stop-loss feature provides an added benefit to the typical 80/20 split. Usually once the deductible is satisfied, insurers will pick up 80% of future medical expenses and the insured is responsible for the remaining 20%. With the stop-loss feature, there is an additional element providing for maximum out-of-pocket expenditures for the insured.
Bud's hospital bills for five days amounted to $4,500. His major medical policy requires a $500 deductible, an 80/20 coinsurance, with a stop-loss feature of $2,000. Let's figure out what his out-of-pocket expenses are.
$4,500 - $500 (deductible) = $4,000
20% of $4,000 = $800 (Bud's responsibility)
$4,000 - $800 = $3,200 (insurer's responsibility)
$800 + $500 = $1,300 (Bud's total out-of-pocket expenses)
Bud has satisfied his deductible for the year and $800 goes toward his $2,000 stop-loss, so all he has to meet for any future medical expenses during the year is $1,200 ($2,000 - $800 = $1,200).
Now let's say Bud incurs further medical expenses, this time totaling $10,000. He has already satisfied his deductible from the previous illness, but he's still responsible for his share of the coinsurance up to the stop-loss limit.
20% of $10,000 = $2,000
$2,000 - $800 (already applied to stop-loss) = $1,200
Bud is only responsible for $1,200 in this case. Any further covered medical expenses for the year become the insurer's responsibility.
(See page 287 Florida study manual.)
