What is "co-insurance" in health insurance policies?

Co-insurance in health insurance policies refers to a cost-sharing mechanism between the insurer and the insured. Under this arrangement, after the insured has met their deductible, they are responsible for paying a predetermined percentage of the cost of covered healthcare services. For example, if a policy includes 20% co-insurance, the insured will pay 20% of the costs, while the insurance company covers the remaining 80%. This arrangement helps to lower premium costs since the insured shares some of the financial responsibility for their healthcare expenses.

In the context of health insurance, co-insurance serves to encourage more prudent use of medical services by placing some financial responsibility on the insured. This can also help to prevent over-utilization of healthcare services because individuals might be more mindful of costs when they know they have to contribute a portion themselves.

Other options offered do not accurately define co-insurance. A fee for switching insurance providers does not relate to cost-sharing. An additional type of coverage does not describe the concept of co-insurance, but rather suggests something different entirely. Lastly, a penalty for late premium payments involves the timing of payments rather than the sharing of costs concerning healthcare services.