Coinsurance vs. Copay: How Much Will You Pay Out of Pocket?

Coinsurance and copays are the two major cost-sharing models used by health insurance companies.

They are costs in addition to any deductible you must pay.

Still:

Health insurance plans may help make healthcare more affordable.

This is especially true when you face significant medical expenses.

Unfortunately, health insurance is anything but simple.

Understanding how coinsurance and copays work can make your life easier.

It can also help you make a financially wise choice if you have multiple plans to choose from.

The Big Picture of How Health Insurance Works

Health insurance plans have a set of guidelines in place that determine what they pay for and when they’ll pay for those expenses.

To get covered under health insurance, you pay monthly premiums.

In some cases, employers or tax credits cover part of or all of your premium payments for you.

Premium payments aren’t the only costs you’ll incur as part of a health insurance plan.

Deductibles

Most plans charge a deductible.

This represents costs you must pay before your health insurance starts paying for medical expenses.

Your deductible resets each year. This means you have to pay the deductible amount every year before coverage kicks in.

It’s more complicated than that, though.

Some services, such as annual checkups or other preventative care, may be covered without paying your deductible first.

That said, you must meet the deductible before coverage kicks in for most medical costs.

For example, a sick visit at your primary care physician would require paying your annual deductible first.

You may also have a deductible for regular medical costs and another one from prescription drug costs.

The deductible isn’t the only cost you’ll pay.

Most health insurance plans use one of two models to calculate how much you’ll owe for medical care once you’ve met your deductible.

Some insurance plans use both models, so it’s best to understand them both.

What is a Copay?

Copays are an easy way to calculate the costs you pay for medical expenses.

They are flat dollar amounts per visit.

Each time you visit a provider, you pay a copay.

Based on the type of provider you visit, you pay a different category of copay.

Here’s an example of copays and categories a health insurance plan may use:

• Primary care provider visits - $20
• Specialist visits - $50
• Emergency room visits - $250

As you’d imagine, each visit type doesn’t have the same costs.

A simple primary care provider visit may only require you to pay $20 per visit.

This is because these visits generally cost health insurance companies less.

However, an emergency room visit could come with a $250 copay.

These are often higher because emergency room care is costly.

Where to find copay amounts

The good news:

Copays are defined in your health insurance plan.

By reading your plan, you can know exactly what to expect before you seek out care.

These copays are printed on your insurance card. The providers generally want the copayment amount at the time of service.

What is Coinsurance?

Coinsurance is the other method used to calculate your share of medical expenses after paying your deductible each year.

Coinsurance works similarly to your copay.

It’s a bit more complicated to calculate, though.

Instead of paying a flat dollar amount per service type, you pay a percentage of the bill.

Coinsurance percentages owed may vary by visit type.

Here’s an example:

• Primary care provider visits - 20% coinsurance
• Specialist visits - 25% coinsurance
• Emergency room visits - 30% coinsurance

Price shopping is advised

Paying coinsurance is more complex as each insurance company has prenegotiated rates for services with certain providers.

Some providers may ask for this amount upfront, but many have to calculate the bills before knowing how much you owe.

In this case, they may send you a bill after the visit concludes.

If a visit to the dermatologist, a specialist, ends up costing $400 and your copay is 25%, you’d owe $100 for the appointment.

You can save money with coinsurance if you can price shop before you visit a doctor.

Sadly, pricing information is rarely available, which makes this problematic.

Combined Copays and Coinsurance

Some health insurance plans use copays for some services and coinsurance for others.

Plans may set flat dollar amount copays for doctor visits but a coinsurance percentage for emergency room visits.

This, combined with the known fact emergency room visits are expenses, may help deter people from visiting the emergency room for non-emergency services.

Out-of-Pocket Maximums

The amount you pay out of pocket for medical care isn’t unlimited under Affordable Care Act governed health insurance plans.

Instead, each plan has an out-of-pocket maximum.

This amount limits the out-of-pocket costs you pay during the year.

Once you reach this limit, the health insurance company starts paying for all medical costs, such as doctor visits, for the rest of the year.

That means no more coinsurance payments and no more copays.

Unfortunately, premiums are not included in the out-of-pocket maximum limit.

Picking a Health Insurance Plan

Picking a health insurance plan may be simple if your employer only offers one plan.

It can get complex if you have many similar plan options to choose from.

Open enrollment period

You can buy or change health insurance plans during open enrollment, which usually happens toward the end of a year.

Alternatively, people with a special qualifying event may be able to buy or change health insurance plans for a short period mid-year.

Where to buy health insurance

You generally look for health insurance plans in a few places.

Employers often offer health insurance coverage as an employee benefit. Many employers pay for part or all of the costs, too.

This typically makes employer-sponsored health insurance cheaper than alternatives.

Even so, there are other ways to get health insurance.

You can shop on your state marketplace’s website for coverage.

If your state doesn’t have a marketplace, you may be able to shop on Healthcare.gov.

Health insurance agents or health insurance brokers can also help you shop for policies.

Some of these policies may not be Affordable Care Act compliant, so make sure you understand what you’re purchasing before you buy.

When looking at health insurance plans, you may notice each plan works in different ways.

In some cases, a health insurance company or employer may offer several versions of the same plan.

Pricing

Each plan may be priced differently depending on how the benefits work.

For example, a plan with a low deductible and low copay may have high premiums.

The higher premiums help cover the insurance companies’ costs when they don’t receive as much assistance paying for costs through deductibles and copays.

The provider may offer a plan with a high deductible and high coinsurance for a relatively low premium.

These are cheaper because you pay a large portion of the healthcare costs yourself before the insurance company has to make payments.

There may be options priced in the middle, too.

In general, here is how the relationship between health insurance costs and premiums works out:

Higher deductible, copays or coinsurance - Lower premiums
Lower deductible, copays or coinsurance - Higher premiums

Evaluating copays vs. coinsurance

Deciding for a copay vs. coinsurance medical plan can seem tricky.

Ideally, your goal should be to pick the option that results in the lowest overall costs to your family over a year.

You have to estimate how much care you’ll need since these expenses will occur in the future.

Copays are straightforward to calculate. You simply multiply the number of each type of visit by the copayment amount.

Coinsurance is trickier. You have to know how much each visit of each type will cost you to calculate how much the coinsurance would be.

Finding good data about how much a provider charges for services is nearly impossible.

Instead, you’ll have to estimate based on previous experience. Alternatively, you could use online calculators to help come up with an estimate.

Once you’ve compared the coinsurance and copay payment amounts, add in the other plan costs.

These include deductibles, premiums, and any other costs you may have to pay.

After calculating the totals, picking the plan that providers the lowest cost is generally a good idea.

Ask for Help If You Need It

If you need help deciding on a health insurance plan, you may have options.

For workplace plans, a human resources representative may be able to help.

In some cases, you may have to call the health insurance company for specific questions, though.

If you’re shopping for a health insurance plan outside of work, a health insurance broker may be able to help.

Health insurance brokers have access to sell plans from several providers. They can help match you with a policy that makes sense for your family.

These people can help explain confusing terms, such as deductible, coinsurance, and copays.

They do get paid on commission. Make sure you thoroughly understand the plan and that you feel it is a good fit before purchasing.