Copays, Deductibles and Coinsurance

With healthcare, there are three important elements related to the overall cost of a plan: deductibles, copayments, and coinsurance. All three impact your total yearly costs—sometimes even more than your plan’s premium—and it’s worth understanding what each is and how they contribute to what you pay.

Deductible

A deductible is the amount you, the policyholder, must pay for covered healthcare services before the insurance company steps in to cover the rest. For example, if you have a $2,000 deductible, you pay the first $2,000 of covered services. Once you pay your deductible, you usually pay a copayment or coinsurance for additional covered healthcare services or therapies, up to an out-of-pocket maximum or the most you’ll have to pay for covered services in a plan year.

The type of health insurance plan you have and the level of coverage you choose will affect your deductible. Typically, the higher the monthly premium, the lower the deductible. Nevertheless, all Affordable Care Act marketplace plans pay the full cost of certain preventive benefits before you meet your deductible. 

The costs of covered services will add up throughout the year until your total payments reach the deductible total specified on your policy. Individuals who switch plans (due to a qualifying life event (QLE)) will start over with a new deductible on the new plan.

Copayment

A copayment or “copay” is the fixed amount you pay for medical expenses. In many health insurance plans, you pay 100% of the costs out-of-pocket until you reach your deductible, then you pay a copay. Imagine the cost for a doctor’s visit with your health plan is $100, and your copay for a visit is $20. If you paid your deductible, you pay $20 for the visit. However, if you haven’t met your deductible, you pay $100.

Copayments can vary between services, even within the same plan, whether prescription drugs, lab tests, visits to a specialist, etc. They can also vary with in-network and out-of-network care. Normally, you will pay more for an out-of-network service—in fact, some plans might not cover out-of-network services, while others may require you to pay the difference between charges from an in-network and an out-of-network provider.

We recommend you use in-network providers for your healthcare needs.

Coinsurance

Coinsurance is the percentage of costs you pay for medical expenses (e.g., hospital stay, office visit, medical device, or prescription drug), often after you’ve met your deductible. With most health insurance plans, you pay 100% of costs out-of-pocket until meeting your deductible, and then you pay a defined percentage, or coinsurance amount, for any additional covered medical expenses. Your health insurance plan will cover the rest.

If you have what’s known as an “80/20” plan, the insurance company will cover 80%, and you will pay the other 20% until you reach the maximum out-of-pocket limit. Coinsurance will only apply to covered services outlined in the policy; if you have expenses from services not covered in your plan, you must pay the entire bill.

Although copay and coinsurance relate to your responsibility to pay a portion of healthcare costs, recall that a copay is a set dollar amount, unlike coinsurance, which is a percentage of the total cost.

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