What does “cost sharing” in health insurance refer to?

Cost sharing in health insurance refers to the practice where the financial burden of healthcare services is divided between the insurer and the insured. This mechanism is a fundamental aspect of most insurance plans, designed to help control costs and encourage responsible use of healthcare resources. It typically includes components such as deductibles, copayments, and coinsurance.

In effect, by requiring the insured to share some of the costs, it promotes more prudent decisions about health care usage, ensuring that individuals think critically about the services they seek. This arrangement also helps to maintain the overall affordability of health insurance premiums, as spreading the risk and costs can keep prices from rising excessively. Thus, the understanding of cost sharing is essential for consumers to navigate their health insurance plans effectively and manage their financial responsibilities within the healthcare system.