Understanding health care can be confusing. That’s why it’s helpful to know the meaning of commonly used terms such as copays, deductibles, and coinsurance. Knowing these important terms may help you understand when and how much you need to pay for your health care. Let’s take a look at these three terms to better understand what they mean, how they work together, and how they are different.
What is a copay?
A copay (or co-payment) is a flat fee that you pay on the spot each time you go to your doctor or fill a prescription. Let’s say you hurt your back and go see your doctor. Or you need a refill of your child’s asthma medicine. The amount you pay for that visit or medicine is your copay. Your copay amount is printed right on your insurance card. Copays cover your portion of the cost of a doctor’s visit or medicine.
Do I ever not have a copay?
If your health insurance plan pays 100% for annual check-ups and preventive care services, you may not have a copay for those visits. For sure, you don’t have a copay when you meet your yearly out of pocket maximum.
What is a deductible?
A deductible is the amount you pay each year for eligible medical services or medicines before your insurance plan kicks in. For example, if you have a $1,000 yearly deductible, you’ll need to pay the first $1,000 of your total eligible medical costs.
What costs count toward my annual deductible?
Many costs for eligible medical services count toward your deductible. Examples include bills for hospitalization, surgery, lab tests, MRIs, CAT scans, anesthesia, physical therapy, medical devices such as pacemakers, mental health care, and chiropractic care.
What costs don’t count toward my annual deductible?
In most cases, copays don’t count toward your deductible. Premiums also don’t count toward the deductible.
What else do I need to know about deductibles?
Deductibles for family coverage and individual coverage are different.
If your plan includes out-of-network benefits and you go to in-network doctors and hospitals, your deductible amount will be much lower than if you go to out-of-network doctors and hospitals.
How do I decide what deductible amount to choose?
Let’s say you’re mostly healthy and don’t expect to need costly medical services during the year. A plan that has a higher deductible and lower premium may be a good choice for you
On the other hand, let’s say you know you have a medical condition that will need care. Or you have an active family with children who play sports. A plan with a lower deductible and higher premium that pays for a greater percent of your medical costs may be better for you.
Depending on your health plan, you may have a deductible and copays. Deductibles and copays work together to help you pay for your portion of your medical expenses. From the above definition, we now know that the deductible is the amount you pay for eligible medical services or medicines before your insurance kicks in. If your plan includes copays, you pay the copay flat fee on the spot (at the time of service), each time you go to your doctor, or fill a prescription. Depending on how your plan works, the copay may go toward your deductible.
What is coinsurance?
Coinsurance is a portion of the medical cost you pay after your deductible has been met, and your health plan kicks in. Coinsurance is a way of saying that you and your insurance carrier each pay a share of eligible costs to add up to 100%.
Here’s an example of how coinsurance works once you’ve met your deductible. If your coinsurance is 20%, you pay 20% of the cost of your medical bills. Your health insurance plan will pay the other 80%. Let’s say you meet your annual deductible in June. In July, you need an MRI that costs $2,000. Your coinsurance share is 20%. That means you need to pay $400 ($2,000 x 20%). Your insurance company pays the other $1,600. The higher your coinsurance percentage, the higher your share of the eligible cost is.
How long do I have to pay copays and coinsurance?
You don’t have to pay copays and coinsurance forever. You only pay until you meet your out-of-pocket maximum. This is the most you could pay for covered medical expenses in a year. This amount includes money you spend on deductibles, copays and coinsurance. Once you reach your annual out-of-pocket maximum, your insurance will pay your covered medical and prescription costs for the rest of the year.
Depending on your health plan, you may have copays or coinsurance. They both help you pay for your portion of your medical expenses. Copays are the flat fees you pay on the spot and may count toward your deductible. Coinsurance dollar amounts vary, based on the services received, and kick in when your deductible has been met. You usually do not pay on the spot and the amount does not go toward your deductible.
The difference between copays and coinsurance
Copays Coinsurance – Paid each time you visit your doctor or fill a prescription. Paid when you’ve met your deductible (when your insurance plan kicks in). Fixed dollar amount. Actual dollar amount varies. You pay a portion of the total cost. Counts toward your deductible (in some cases). Does not count toward your deductible. Paid on the spot at the time of the service. You’re sent an Explanation of Benefits (EOB) from your health plan, after you get service.