Copay, coinsurance and out-of-pocket maximum
Using your insurance plan may be easier when you understand common health care terms and what they mean. It also may make it easier to manage your health care costs when you learn what the cost terms mean for your wallet. So, let’s take a closer look and learn the difference between copays, coinsurance and out-of-pocket maximums.
What is a copay?
A copay (or copayment) is a fixed amount you may pay for a covered health care service, usually at the time you receive the service
How does a copay work?
You might remember times when you went in for a doctor visit and maybe paid a $15 or $20 copay before or after your visit. Copay amounts can vary depending on the provider and service. With health plans that have copays (not all do), you’ll know exactly what you have to pay ahead of time – which can help you budget your health care costs. For most plans, your copay does not apply toward your deductible. Also, some services may be covered at no additional cost, or $0 cost share, such as annual wellness exams and certain other preventive care services.
What is copay?
What is coinsurance?
Coinsurance is a percentage of the cost of a covered service. Until you reach your deductible, you’ll pay for 100% of out-of-pocket costs. After you meet your deductible, you and your insurance company each pay a share of the costs that add up to 100 percent. Typical coinsurance ranges from 20% to 40% for the member, with your health plan paying the rest. But cost-sharing percentages will vary depending on your plan.
How does coinsurance work?
If your doctor visit costs $100 and you’ve met your deductible, your coinsurance payment of 20% would be $20 out of pocket. Your insurance would then pay the rest of the allowed amount ($80). Keep in mind, your coinsurance benefit doesn’t apply until after you’ve reached your deductible. Until then, you’ll need to pay 100% of the cost.
What is coinsurance?
What is an out-of-pocket maximum or limit?
You might have heard terms like out-of-pocket maximum or limit. But good news — they actually mean the same thing. So your out-of-pocket maximum or limit is the highest amount of money you could pay during a 12-month coverage period for your share of the costs of covered services. Typically, copays, deductible, and coinsurance all count toward your out-of-pocket maximum. Keep in mind that things like your monthly premium, balance-billed charges or anything your plan doesn’t cover (like out-of-network costs) do not.
When a provider bills you for the difference between the provider’s charge and the allowed amount. For example, if the provider’s charge is $100 and the allowed amount is $70, the provider may bill you for the remaining $30. A preferred provider may not balance bill you for covered services.
How does an out-of-pocket maximum work?
If you meet your out-of-pocket maximum, your plan will usually pay 100% of your covered health care costs (up to the allowed amount). Let’s say you have an annual out-of-pocket maximum of $6,000. That means once you’ve paid $6,000 out of pocket that year for your covered health care, usually including deductibles, copays and coinsurance, your plan will cover any future (covered, in-network) health care services during your coverage period.
The maximum amount a plan will pay for a covered health care service. May also be called “eligible expense,” “payment allowance,” or “negotiated rate.” If your provider charges more than the plan's allowed amount, you may have to pay the difference (balance-billed charge).
What is out of pocket limit?
Compare how copays and coinsurance work
There's a lot to understand when you're sorting out the difference between copays and coinsurance. Here's a quick view to help explain how these two types of payments work differently.
| Copay | Coinsurance | |
|---|---|---|
| What is the amount paid? | Flat dollar amount | Percentage of the cost, if you've met your deductible |
| When is it paid? | Typically paid at the time of service | Billed by the provider who you will pay directly |
| Does it count toward your deductible? | No, not in most plans | |
| Does it count toward your out-of-pocket max? | Yes | Yes |
Knowing how copays, coinsurance and out-of-pocket maximums work can help you add up your potential costs more accurately when you're planning for the year or when you're choosing your health plan during open enrollment.
