What advantage does coinsurance provide in health insurance?

Coinsurance provides a significant advantage in health insurance by encouraging responsible healthcare spending through the sharing of costs between the insured and the insurer. Under a coinsurance arrangement, after the insured has met their deductible, they are responsible for a specified percentage of the medical expenses incurred, while the insurer pays the remaining percentage. This cost-sharing mechanism motivates individuals to consider the expenses associated with healthcare services, as they will be financially responsible for a portion of the costs.

For example, if a plan has an 80/20 coinsurance structure, the insurer covers 80% of the costs after the deductible is met, while the insured must pay the remaining 20%. This model helps to curb unnecessary medical spending because insured individuals are more likely to analyze their healthcare choices, seek alternative treatment options, or utilize preventive care, knowing they will share in the costs.

In contrast, other options imply benefits that coinsurance does not provide. It does not eliminate hospital fees or guarantee full coverage of all expenses (as there remain out-of-pocket costs for the insured). Additionally, while prior authorization may be necessary for certain treatments or services, coinsurance itself does not inherently reduce the need for such authorizations.