What is coinsurance in health insurance terms?

Coinsurance is an important concept in health insurance that refers to the percentage of eligible medical expenses that a policyholder is responsible for after they have met their deductible. Once the deductible is satisfied, the insurance company typically covers a certain percentage of the costs, while the insured pays the remaining percentage. This arrangement incentivizes policyholders to consider the cost of services they utilize, as they are sharing in the payment of their healthcare expenses.

For example, if an individual's health insurance plan has a coinsurance rate of 20%, after meeting the deductible, the insurance would cover 80% of the allowed charges for a specific medical service, while the individual is responsible for the remaining 20%. This shared cost structure helps manage healthcare spending and promotes a more cost-effective approach to utilizing healthcare services.

The other answer choices represent different aspects of health insurance: a fixed copayment per visit, a cap on overall out-of-pocket expenses, and payments made prior to coverage commencing, which do not accurately describe the coinsurance mechanism.