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Copayments and Coinsurance

For the remainder of the summer, we will be reposting educational material on Health Insurance Basics which was originally aired in 2021, with updated 2022 figures where appropriate. If you didn’t watch these videos, please do, and tune back in after Labor Day for new material. Thanks, and have a wonderful summer.

As mentioned in our first Health Insurance Basics article, the deductible is the amount the insured pays for covered services before the insurance company is obligated to pay. The out-of-pocket maximum (our last video in the Basics series) is the level of out-of-pocket expense for in-network services beyond which the insurance company is obligated to pay for ALL in-network services.

In-between the deductible level and the out-of-pocket maximum are copayments and coinsurance where the covered individual and the insurance company share the responsibility for payment of claims. A copayment is always a fixed amount and coinsurance is always a percentage of the allowed amount of the claim. Many Plan designs include both copayments and coinsurance.

On a practical level, you want to know enough about your Plan to know that what you pay is correct and to understand your financial exposure. We generally think of copayments as modest but some Plans have $500/day copayments for a hospital admission up to a certain maximum. Similarly, coinsurance associated with a costly medical procedure will likely be costly.

You also want to know when copayments or coinsurance should be waived. Most well care, for example, is covered by the premium for Affordable Care Act-compliant plans. Copayments and coinsurance should not be charged. Similarly, many plans, including Medicare Part D plans, waive copayments for inexpensive drugs.

What you spend out-of-pocket on in-network services during the deductible, copayments and coinsurance all aggregate toward the out-of-pocket maximum. Copayments for drugs should also be included in that aggregate amount with out-of-pocket expenditures for in-network medical services. Unfortunately, these expenses are often found on two separate websites so keep that in mind.

Please watch our video and share this information with all who need it. In our view, just about everyone! Thank you.