Copayments and Coinsurance
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 maximum dollar amount of out-of-pocket expense you pay for in-network services beyond which the insurance company is obligated to pay for ALL in-network services.
In-between the deductible and the out-of-pocket maximum are copayments and coinsurancewhere 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. There are also some medications which are mandated to be covered at no cost-share for Affordable Care Act compliant plans (which includes most group and individual policies) regardless of where you are in terms of the deductible, such as contraceptives, some cholesterol medications, some breast cancer prevention medications, and smoking cessation products, to name a few.
What you spend out-of-pocket on in-network services during the deductible and on 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 that don’t always communicate in real time 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.