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What Is Cost-Sharing?


Updated December 31, 2013


Cost-sharing is a technique health insurance companies use to save money. The health insurer requires you to pay part of the cost of your health care expenses.

The most common forms of cost-sharing are deductibles, copayments, and coinsurance. The monthly premiums you pay to get health insurance coverage aren’t considered a type of cost-sharing.

Cost-sharing saves your health insurance company money in two ways. First, you’re paying part of the bill; since you’re sharing the cost with them, they pay less. Second, since you have to pay part of the bill, it’s more likely you only seek medical care when you really need it.

Cost-Sharing & the Out-Of-Pocket Maximum

Because cost-sharing can get expensive if you have large medical expenses, many health plans that require cost-sharing also have an out-of-pocket maximum that puts a cap on how much cost-sharing you’re responsible for each year. After you’ve paid enough in deductibles, copayments and coinsurance to reach the out-of-pocket maximum, your health plan suspends your cost-sharing and picks up 100 percent of your covered medical bills for the rest of the year.

Cost-Sharing & the Affordable Care Act

The Affordable Care Act made preventive health care exempt from cost-sharing. This means things like your yearly physical aren’t subject to a deductible, copayments, or coinsurance.

The ACA also created a cost-sharing subsidy to make using your health insurance more affordable if you have a low income. The cost-sharing subsidy lowers the amount you pay in deductibles, copays, and coinsurance each time you use your insurance.


Also Known As:

Although the phrases cost-sharing and out-of-pocket expenses are sometimes used interchangeably, they're not exactly the same.

All of your cost-sharing expenses count as out-of-pocket expenses. But, there are some out-of-pocket expenses that don't count as cost-sharing.

For example, cosmetic procedures like liposuction usually aren't covered by health insurance, so if you get one, you'll have to pay for it yourself. However, since it isn't a covered benefit of your health insurance, the money you pay out-of-pocket for it isn't considered cost-sharing.


Alternate Spellings: cost sharing

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