What is the purpose of coinsurance in a health insurance policy?

Coinsurance in a health insurance policy serves a crucial role in cost-sharing between the insured individual and the insurance provider. The main purpose of coinsurance is to ensure that both parties are financially invested in the healthcare services utilized. Typically expressed as a percentage, coinsurance indicates the portion of the costs that the insured must pay after reaching the deductible, with the insurer covering the remaining percentage.

For example, if a health insurance policy has a coinsurance rate of 20%, the insured is responsible for paying 20% of the covered healthcare service costs, while the insurer covers the remaining 80%. This arrangement not only encourages more prudent use of healthcare services by the insured but also helps to control overall healthcare costs by reducing over-utilization. The shared responsibility incentivizes individuals to consider the necessity of medical services before incurring expenses.

The other options do not accurately capture the essence of coinsurance: the premium amount is determined independently of the coinsurance structure; maximum out-of-pocket expenses are related to separate provisions in the policy; and frequency of benefit utilization is governed by other policy terms rather than being a function of coinsurance.