Cost Plus

Definition - What does Cost Plus mean?

Cost plus is a type of contract where a vendor is paid for the expenses of providing a service or completing a task, plus an additional sum. In the context of insurance, some policies are set up around a cost plus model to encourage price transparency and reduce overall costs. There are also cost plus health insurance plans available as a supplement to basic plans.

Insuranceopedia explains Cost Plus

The main benefit of cost plus models is in their transparency. The vendor has an accurate idea of their profit margin and need not worry about expenses taking away from it, and the purchaser has a better idea of the exact cost of a service without needing to worry about fraudulent, marked up, or duplicate charges. In terms of health insurance, cost plus models may represent a much fairer and simpler way to handle medical billing so that all parties, i.e., the patient, health care provider, and insurer, can benefit from a model that does not favor one party over another.

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