(Updated Jan. 14, 2021)
Whether you’re still on your parent’s insurance, have a health insurance plan through an employer, or are even receiving Medicare, there may still be some out of pocket costs associated with your health care. It could be for consultation, prescription drugs, or ongoing treatments.
When getting an insurance quote for medical services from a health insurance company, you may run into a series of words when it comes to the amount you pay. Coinsurance, co-payments, and deductibles are quite common in the world of insurance and the healthcare industry.
Essentially, these are all forms of cost-sharing between you and the insurance carrier. For example, if you have coverage for a doctor visit, you might pay $20 for the consultation while the insurance company picks up the rest of the tab. That’s known as a co-pay amount.
There are plenty of people who mix up the terms coinsurance, copay, and deductible. All three terms refer to the portion of the medical bill patients are responsible for paying out of pocket. But there are different situations for each type of payment.
Deductible
A deductible is an amount you pay out of pocket prior to the insurance policy covering the remaining eligible costs. The deductible can vary greatly, with the premium usually going down as the deductible goes up, and vice versa. It’s one way you can manage the out of pocket maximum expenses.
For example, if you have a deductible of $1,500, you pay all medical expenses up to the $1,500 mark. At that point, you share medical expenses with your insurance company by paying copays and coinsurance.
If you are in great health, don’t smoke, and live a healthy lifestyle, it might make sense to agree to a higher deductible to keep your premiums at a discounted rate. Of course, that means you will pay a lot more for an accident or other health-related issues before the insurance company starts paying.
Copay (Copayment)
A copayment is likely the most familiar term related to patients’ out-of-pocket expenses. It’s usually a fixed dollar amount insured patients have to pay every time they use insurance related to medical consultations or procedures. Just like deductibles, the higher the copay, the lower the premium.
Copays are similar to deductibles in that they are usually a fixed amount paid each time you use your insurance plan. However, copays tend to be smaller than deductibles because they are used with greater frequency and lesser circumstances. This may include routine checkups or annual exams.
Coinsurance
Coinsurance is defined as your share of the costs of healthcare, usually a percentage that kicks in after you finish paying the deductible. The percentage paid by the patient can also vary a good amount depending on the plan.
For instance, if your coinsurance is 80/20, your insurance company would pay 80 percent of the expenses after the deductible is met. You are responsible for the remaining 20 percent. That’s how coinsurance differs from deductibles and copays – there is no fixed amount.
Most insurance plans will employ some combination of a deductible, copay, and coinsurance. It’s up to you to check into the specific rules of the policy to adjust the numbers. Make sure to consider your current fitness or health levels as well as the parameters of your budgetary needs.
Medicare Coverage
You have been paying into Medicare your entire working life. A percentage of your paycheck goes towards Medicare, which is health insurance you purchase through the government, which can be used once you hit 65 years of age, or become disabled. In certain situations, Medicare will be paying 100 percent of the costs.
While it will be more involved than this, here’s a very basic summation of what to consider with each element we’ve discussed:
Deductible – A plan with a high deductible will offer more affordable monthly payments. Try your best to figure out how often you need the care to see if the deductible works for you. Keep in mind that some insurance plans may cover certain services before you pay the deductible.
Coinsurance – In most cases, the lower your monthly payments are, the higher the coinsurance payment will be.
Copays – If you have several prescriptions and need to visit your doctor and pharmacy frequently, it might be best to choose a plan with a low copay.
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