Definitions
Cost sharing is a common feature in both private insurance plans and public insurance programs. While primarily a financing mechanism, cost sharing can also be used to affect the extent to which people enroll in or use services. There are three main types of cost sharing:
- Premiums or enrollment fees are payments that families must pay periodically (e.g., monthly, quarterly, or annually) to enroll in and continue to receive health care.
- Deductibles are a specific dollar amount that a family must pay out-of-pocket before the insurance plan begins to cover services.
- Copayments and coinsurance charges are charges that beneficiaries pay when they receive a service. A copayment is a dollar amount that someone must pay when using a specific service. Coinsurance is similar to a copayment, but is expressed as a percent of the cost of the service received (rather than as a flat dollar amount).
Along with cost sharing charges, families may face other out-of-pocket costs for health care if they need services that are not included in their benefit packages. As a result, their total out-of-pocket costs can sometimes significantly exceed the amount that they spend on premiums and other cost-sharing charges.
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Framing the Issue