How do deductibles, coinsurance and copays work?
Who is this for?
This information will help you if you're shopping for health insurance and have questions about how it works.
Lately, there is a lot of talk about cost sharing. You're probably wondering what exactly that means. When both you and your health insurance company pay part of your medical expense, it’s called cost sharing. Deductibles, coinsurance and copays are all examples.
Understanding more about what the words deductibles, coinsurance and copay mean—and how they work together—will help you make the right choice when you’re selecting a health insurance plan.
Understanding the terms
Deductibles, coinsurance and copays are all amounts you may have to pay for health care services. Here’s how they work together.
- A deductible is the amount you pay for health care services before your health insurance begins to pay.
For example, if your deductible is $1,500, you would pay 100 percent of your health care charges until the amount you paid reaches $1,500. After that, some services you receive may be covered at 100 percent, or you may have to pay coinsurance.
These are some other words you may see.
- After deductible: This lets you know that we start sharing costs with you for a service after you’ve met your deductible.
- No deductible: You don’t have to pay toward your deductible for this service. You’ll still have to pay any copays.
- Before deductible: We cover this service before you’ve met your deductible. You’ll still have to pay any copays.
- Coinsurance is your share of the costs of a health care service. It's usually figured as a percentage of the total charge for the service. You start paying coinsurance after you've paid your plan's deductible.
Say you’ve already paid out (or met) your $1,500 deductible and your coinsurance is 20 percent. For a $100 health care bill, you would pay $20 and your insurance company would pay $80.
- A copay is a fixed amount you pay for a health care service, usually when you receive the service. The amount can vary by the type of service. You may also have a copay when you get a prescription filled.
For example, a doctor’s office visit might have a copay of $30. The copay for an emergency room visit will usually cost more, such as $150. However, there is a maximum amount you will pay for coinsurance and copays. This is called the coinsurance and copay maximum.
What does this mean for me?
When you’re choosing a health insurance plan, you’ll want to look at more than the premiums and deductibles. Take a look at the coinsurance amount, too, and then decide which deductible, premium and coinsurance mix is the best option for you and your finances.
If you visit your doctor often, you might want to choose a plan that has low copays. For instance, you might choose a plan that has a higher monthly premium but no copay for doctor’s office visits.
However, if you don’t visit the doctor often, copays will probably be less of a concern when you’re shopping for coverage.
- How to understand deductibles and their impact on premiums
- What is coinsurance?
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