California Life and Health Insurance Practice Exam

Co-insurance is a crucial concept in health insurance that describes how costs are shared between the insured and the insurer after a deductible has been met. In this arrangement, once the insured has paid their deductible, they are responsible for a certain percentage of the medical expenses incurred for covered services. This means that the health insurance company pays the remaining percentage of those costs.

For example, if a policy has a co-insurance of 20%, and a medical bill totals $1,000, the insured would pay $200 (20% of the total), while the insurance company would cover the remaining $800. This arrangement helps to keep health care costs manageable for insurance companies while encouraging insured individuals to be mindful of their healthcare spending, as they share in the costs.

This mechanism promotes responsible usage of healthcare services and balances the cost burden between the insurer and the insured, aligning with how many health insurance plans are structured.