Cost sharing is the portion of health care costs the member pays out of pocket while enrolled in a health plan.
Under a health policy, this usually includes a deductible, co-payments, or coinsurance. The design is meant to control utilization and keep premiums lower by sharing routine financial risk between insured and insurer.
How it works in claims
When a claim is processed, the claim system applies the deductible first, then cost-sharing percentages. Some services may have lower or higher member contributions depending on whether they fall inside in-network, preventive, or specialty categories.
Underwriting and plan design effect
Insurers build cost-sharing into the expected claims pattern. Higher cost sharing tends to lower expected utilization but increases member expense volatility, which influences premium pricing and product competitiveness.
Practical example
If a member has a $1,000 deductible and a 20% coinsurance, the insurer pays nothing until that deductible is met. For a hospital claim of $5,000 afterward, the member may pay $1,000 and the insurer pays $4,000 (assuming no out-of-pocket maximum interaction).
Regulatory context
For marketplace and employer plans in many jurisdictions, rules around covered services and maximum out-of-pocket levels limit how severe cost sharing can become in practice.