Understanding a Health Insurance Copayment
Published on January 22, 2017
Copayments are a common form of cost-sharing under many health insurance plans. Cost-sharing between the insurance company and the policy holder can help keep your monthly premiums in check. Understanding how this system works helps you make smart insurance choices that suit both your health care needs and budget. But what exactly does it mean when you make a health insurance copay?
What is a Copay?
A health insurance copayment is a fixed amount established by an insurance plan for sharing the cost of certain health services between the insurance plan and the insurance customer. Insurance plans are a partnership between consumers and the company offering the policy. The cost-sharing system is a critical selling point for each plan.
Pay special attention to the cost-sharing structure of any health insurance plan you are considering. Whether the plan is just for your or your offering it to employees, anyone enrolled in the plan may be required to pay cost-sharing when they receive medical care. Cost-sharing comes in three primarily forms:
- Copayment Fee– This is a fixed fee for certain kinds of office visit, prescription drugs, or other kinds of care. The health insurance copay lets you know ahead of time exactly how much you will owe. If your policy lists a health insurance copayment of 25 dollars for a doctor visit, you pay that amount each time you see the doctor.
- Coinsurance Percentage– This is a percentage of the total cost for a covered medical service, instead of a fixed copayment fee. If the insurance company owes a doctor 100 dollars for your visit, and you have a coinsurance percentage of 25 percent, you may be required to pay 25 dollars towards the cost of that visit. You may pay it at the time of service or get a bill for your portion based on the coinsurance percentage after you leave the office.
- Annual deductible – An annual deductible is a set dollar amount that you may be required to pay toward covered medical care within a single year. For example, if you have a $3,000 annual deductible, you may need to pay that amount out of your own pocket toward covered medical care before the health insurance company will begin paying your claims.
It’s important to note that copay, coinsurance and deductibles can sometimes apply toward the same medical service, though this isn’t always the case. For example, it’s possible that you may be required to pay coinsurance for a covered medical service even when you’ve already fulfilled your deductible. Or, in some cases, you may be required to pay a copayment and still fulfill your deductible for the same medical service.
It’s also important to note that certain preventive medical services may not be subject to cost-sharing at all. For example, annual preventive care checkups, well-woman visits, and childhood immunizations are generally not subject to copays, coinsurance, or deductibles. These are generally covered with no out-of-pocket cost to the policy holder.
What Services Have a Health Insurance Copayment?
The rules for health insurance copayments vary based on the policy and provider. They are common for:
- Office visits with a primary care physician for non-preventive care
- Office visits with a specialist
- Physical therapy
- Occupational therapy
- Speech therapy
- Mental health in-office services such as physiotherapy or drug counseling
- Ambulance or ER services
As mentioned above, preventive care is generally exempt from cost-sharing thanks to the Affordable Care Act, so copays would generally not apply for these office visits.
You often see a health insurance copay with in-network services only. This means you must pick a provider from the insurance company’s network list. If you go out-of-network, the copayment may not apply, and you may be required to pay the full amount of the bill or a coinsurance percentage.
How Does the Out-of-Pocket Maximum Effect Copayments
Health insurance copayments and other forms of cost-sharing are capped by the out-of-pocket maximum listed for the policy. In other words, if the policy has a 6,500 dollar out-of-pocket maximum, once your contributions reach that amount, you stop paying the copayment for the rest of the year for covered services.
What Plans Offer a Health Insurance Copay?
They are typically associated more with managed care plans such as HMOs. Insurance companies offering HMOs have contracts with healthcare providers that allow them to pay fixed fees for essential services, so it is easier to predict overall costs and to offer a health insurance copayment system to consumers.
It’s also possible, however, to find many PPO-style plans, and other plans, that incorporate copayments into their cost-sharing structure, in addition to annual deductibles or coinsurance.
There are many benefits for both employers and employees when they choose a plan that comes with a health insurance copayment and other forms of cost-sharing. The structure allows insurance companies to keep costs down and the insured know upfront what they will owe for each service.