Coinsurance vs. Copay

Health insurance rarely covers 100% of your healthcare costs. The costs that are not covered are called out-of-pocket expenses for the patient. These are of two types — copay and coinsurance. This comparison explains the difference between the two, as well as related terms deductible and out-of-pocket maximum.

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Coinsurance

Copay

What is it? A percentage of covered benefits that the patient is responsible for paying. A flat amount that the patient pays a healthcare provider (or pharmacy) at every visit.
Typical amounts 10-40% of the provider's bill $15 - $50

Contents: Coinsurance vs Copay

edit What is Copay?

A copay or copayment is the amount of money you are required to pay directly to the healthcare provider (doctor, hospital etc.) per visit, or to a pharmacy for every prescription filled.

Copays discourage unnecessary visits by making the patient responsible for a small portion of her healthcare costs. Copays are typically $15 to $50 per visit but may vary depending upon the following factors:

Copays are applicable until the annual out-of-pocket maximum is reached but many insurance plans waive copays for preventive care visits like annual physicals or child wellness checkups.

High-deductible health plans (HDHP) usually do not have a copay.

edit What is Coinsurance?

The copay is usually too small to cover all of the provider's fees. The provider collects the copay from the patient at the time of service and bills the insurance company. If the provider is in-network, the insurance company first lowers the "allowed amount" to the pre-negotiated rate for that service (more about this in the example below). If the deductible has been met, the insurance plan then covers a large percentage (usually 60-90%, depending upon the plan) of the allowed amount. The patient is responsible for the balance (10-40% of the allowed amount). This balance is called coinsurance.

Coinsurance may be higher when you see an out-of-network provider, but stays the same whether you see a GP or a specialist.

edit What is a Deductible?

The annual deductible specified in your plan is the total coinsurance you must pay in a calendar year before the insurance company starts paying for any healthcare costs.

edit Do copays count toward the deductible?

No, copays do not count toward the deductible. However, copays do count toward the annual out-of-pocket maximum, which is the total amount you are liable to pay for all your healthcare costs in any given year — including copay and coinsurance.

This video explains deductibles, coinsurance and copay:

edit Copay, Coinsurance and Deductible Example

Assume that a plan has a deductible of $1,000, $30 copay and 20% coinsurance.

The patient makes her first visit to a doctor in that year. Like every visit, she pays a copay of $30 at the time of the visit. Suppose the total bill for that visit is $700. The doctor is in the plan's network so the insurance company gets a discounted rate of $630 for that visit. After subtracting the $30 copay from the patient, the balance owed to the doctor is $600.

If the deductible had been met, the insurance company would have paid 80% of this $600 balance. However, since the deductible has not been met yet, the patient is responsible for the full $600.

An illustration of how patient responsibility for healthcare costs is calculated taking into account copay, coinsurance and deductibles. Click the picture to expand.
An illustration of how patient responsibility for healthcare costs is calculated taking into account copay, coinsurance and deductibles. Click the picture to expand.

The second visit is similar. The doctor's $500 bill is discounted down to $430 because of the preferred rate that the insurance company gets. The patient pays a $30 copay and so the balance is $400. Since the $1,000 deductible has not been met yet, the patient is responsible for this $400 too.

But the $600 from the first visit and the $400 from the second visit total $1,000 and serve to meet the deductible. So for the third visit, the insurance plan steps up and starts paying for healthcare costs.

In our example, the doctor's bill for the third visit is $600, discounted to $530. The patient still pays a $30 copay even after the deductible is met. For the $500 balance, the plans pays 80%, or $400 and the patient is responsible for 20%, or $100.

edit Other considerations

Navigating the health insurance maze can be challenging because there are other variables involved. For example,

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