Do Copays Count Toward Deductibles? Here’s How Health Plans Work
Key takeaways:
Learning insurance terms, such as deductibles, copays, and coinsurance can help you understand how your health plan works.
A health plan deductible is the amount you must pay before insurance kicks in.
Copayments (copays) are set costs you pay when receiving medical care; copays do not count toward your deductible.
When shopping for health insurance, most people have questions, such as whether copayments count toward deductible.
If you are feeling a bit confused, you’re not alone. A recent survey by UnitedHealth found that only 9% of Americans understand the basic health insurance terms: premium, deductible, out-of-pocket maximum, copay, and coinsurance.
For the other 91% of you, we’re here to help. Here’s a rundown of the most common insurance terms and how they affect what you pay for healthcare.
What are health plan premiums?
A health plan premium is an amount you pay each month for a health insurance plan.
Premiums are like your Netflix monthly payment, except with insurance, you’re locked into that rate for the year. On top of your premium, your plan may require other payments for healthcare services, such as copays. We’ll explain more about copays below.
What is a health plan deductible?
A deductible is the amount you pay for medical expenses before your insurance kicks in. Having a set deductible doesn’t mean you’ll pay for all of your healthcare services before you reach your deductible.
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Under the Affordable Care Act, insurance plans are required to pay for certain services like preventative care without cost sharing.
And remember: After you reach your deductible, you may still need to share medical costs with your insurance provider. That’s where coinsurance comes in.
What is coinsurance?
Coinsurance is the amount you have to pay for your healthcare costs after you’ve reached your deductible and your insurance starts paying.
Coinsurance is often expressed as a percentage. So if your coinsurance is 20%, you’re responsible for 20% of the cost of care after you meet your deductible. Your plan pays the remaining 80%.
Coinsurance percentages often differ depending on the service, like a hospitalization versus a prescription fill.
What is a copayment?
A copayment (or copay) is a fixed amount you pay each time you use a covered service.
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If your plan includes a $10 copay for generic prescriptions, you’ll need to pay $10 for each generic prescription you have filled. Depending on the plan, copays may apply only after you meet your deductible. But some plans have copays both before and after you reach your deductible.
When deciding which plan works best for you, keep in mind that copays don’t count toward deductibles. If the services you need all have copays and you need them frequently, that cost can add up. But copays — along with your deductible and coinsurance payments — usually count toward your out-of-pocket maximum.
What is an out-of-pocket maximum?
An out-of-pocket maximum or out-of-pocket limit is the most you’ll have to pay for covered services in a plan year.
Before you hit your out-of-pocket maximum, you may spend money on a lot of different services (prescription medications, physical therapy, psychotherapy, specialists, etc). But only payments you make toward covered services count toward your maximum. Usually, that includes your copayments, deductible, and coinsurance.
After you reach your out-of-pocket limit, your plan will pay 100% of the cost of additional covered healthcare services. But that doesn’t mean you should choose the most expensive doctor or hospital out there. Most plans set a predetermined fair price for individual services and will only pay that amount. This is often described as an “allowed amount” for that service. This means you are responsible for anything over that amount.
Coinsurance vs. copay: What are the differences?
This table provides a side-by-side comparison of the differences between copays and coinsurance.
| Coinsurance | Copay | |
|---|---|---|
| What is it? | The amount you’re responsible for after the percentage of covered expenses is paid by insurance — only applies to medical costs post-deductible Example: insurance pays 80%, the coinsurance is 20% |
The amount of money you pay upfront for services or prescriptions |
| How does it work? | Amount you’re responsible for depends on medical costs but the percentage you pay for a specific service is the same regardless (always 20% for hospitalization, for example) | Amount varies depending on the service but is preset for each service (will usually be less than $100) |
| What if you see an out-of-network provider? | Often more for out-of-network providers (coinsurance could be up to 100% | Must stay in network to keep copays low |
| What if you have Medicare? | Coinsurance differs by plan. Traditional Medicare A and B plans require coinsurance only. Medicare Advantage plans require copays and coinsurance. | Medicare patients only pay copays if they have Medicare Advantage. |
| Other things to keep in mind | Lower coinsurance plans often charge higher monthly premiums | Costs more for specialist visits Affordable Care Act (ACA) insurance waives copayment for vaccines and screenings |
What are the differences between deductibles, copays, and coinsurance?
A copay is a flat fee you pay when you visit your healthcare provider or fill a prescription. A deductible is the total amount you pay each year before your health plan starts paying your medical expenses. You pay coinsurance after you meet your deductible. This means that you and your insurance carrier each contribute a percentage of the total costs.
In a nutshell, the differences between deductibles, copay, and coinsurance are:
Deductibles are the total amount you must pay before insurance kicks in.
Copays are out-of-pocket costs paid when you receive medical services.
Coinsurance is a percentage you have to pay after your deductible is met.
The bottom line
Before signing up for insurance, or changing insurance plans, it’s important to carefully examine each prospective company’s coverage rules. This includes its deductibles, copays, coinsurance, premiums, out-of-pocket expenses, and maximums.
You’ll also want to find out about coverage for in-network and out-of-network providers. If you want to stay with your own providers, find out if the plan’s provider network includes your doctors and other healthcare providers.
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References
Masterson, L. (2010). UnitedHealth survey: Most Americans don't understand basic health plan terms. Healthcare Dive.
