What is meant by "cost-sharing" in health insurance?

Cost-sharing in health insurance refers to the portion of healthcare costs that a beneficiary is responsible for paying out of pocket, rather than what is covered by the insurer. This typically includes expenses such as deductibles, copayments, and coinsurance, which are amounts that individuals must pay for services before their insurance coverage begins to take effect or while utilizing their benefits.

Understanding cost-sharing is important because it directly impacts a beneficiary's financial responsibility when accessing healthcare. It emphasizes the shared financial burden between insurers and beneficiaries, as both parties contribute to healthcare expenses. This concept is vital for individuals to grasp, as it affects their choice of plans and services, and ultimately, their out-of-pocket costs when they seek medical care.

Other options describe different aspects of health insurance:

• The total amount the insurer pays refers to the insurer's financial commitment, which does not include beneficiary contributions.

• A flat rate charged by providers describes the billing practices rather than the insured individual’s expenses.

• The total annual amount paid for premiums and deductibles encompasses costs unrelated to out-of-pocket expenses for individual health services, such as the insurance costs themselves and annual deductibles that do not specifically categorize the immediate cost-sharing for services received.