Coinsurance vs. Copays: What are the differences?
Copays are flat fees members pay for things like visiting a doctor's office or a prescription drug. Coinsurance is a percentage of the cost for a health service or drug paid by the member.
What is coinsurance?
Coinsurance is a cost-sharing practice between the health insurance company and the policyholder. It's calculated as a percentage of the cost for a medical service or prescription drug. Once the policyholder reaches their annual deductible, they'll start paying coinsurance. The remaining costs are paid by the health insurer.
The insurer may apply different coinsurance percentages to each health service. So you might pay a different amount for doctor visits, lab work, prescription drugs and other needs. Insurers commonly apply coinsurance to nonpreferred brands and specialty drugs.
The amount of coinsurance also depends on the type of health insurance organization. For preferred provider organization (PPO) members, coinsurance for the same health service might vary if the professional is not in the provider's network. For example, the coinsurance for a primary care doctor in your network might be 20%, but the coinsurance for a primary care doctor outside your network might be 75%.
Health maintenance organizations (HMOs) and exclusive provider organizations (EPOs) usually do not offer any coverage for out-of-network care. The policyholder would have to pay out of pocket for these health care services.
What is a copayment (copay)?
A copay, which is a flat fee the policyholder pays for a health care service, is one way insurers share the cost of medical services. Fees are determined by the insurer and depend on the plan, medical service or prescription drug.
Copays listed in health insurance plans can take effect either before or after the policyholder has reached an annual deductible. After you've reached this amount, you'll pay a copayment.
Alternatively, the insurer may waive the deductible and immediately implement cost sharing. In most health plans, for example, the deductible is waived for a certain number of visits to a primary care physician (PCP) — typically, the first three in a year. Once a member has used their allotted number of copay visits to their primary care physician, they must pay for any additional visits out-of-pocket, up to their deductible amount. At this point, the copayments again apply.
Health plans that apply copays before the deductible or waive them for certain services are generally preferable. It means the insurance company begins picking up some of the costs early on, which is especially important when you're comparing medical expenses. The copay amounts might look very similar on paper, but one type of copay could cost you money when they begin kicking in.
Copays for inpatient hospital stays
Consumers should also look at how often copays apply. For doctor visits, copays are generally very simple: A payment applies for each visit.
In the case of inpatient hospital stays, however, comparing copayments between plans may be a little more complicated. Some plans apply a copayment toward inpatient care on a per-day basis, while others on a per-admission basis. Prescription drug copays can also be somewhat complex.
Under the same plan, for example, you may pay a $10 copay for a 30-day supply at a retail pharmacy, while a mail-order pharmacy charges just $20 for a 90-day supply. In this scenario, the mail-order pharmacy would offer more savings.
Should I choose a plan with coinsurance or copays?
In short, there is no single answer to this question because everyone's health insurance needs and financial circumstances are different. However, some generalities can help health insurance shoppers make a decision when choosing a plan.
Usually, you'll pay less coinsurance with a plan that comes with a cheaper health insurance monthly premium. For example, consider two health plans: one with a monthly premium of $400 and another with a $450 premium. Coinsurance for an emergency room visit might be 30% and 20% for the plans, respectively.
Since copays typically do not count toward health insurance deductibles or out-of-pocket maximums, you should consider these costs when comparing plans. If you regularly purchase prescription medications and anticipate multiple visits to the doctor's office each year, then consider plans with lower copays.
Below, we have provided some examples of costs you might expect for coinsurance and copays for typical health medical services. However, these can vary based on prices the health insurer has negotiated with hospitals, doctors and other providers.
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