What Are Copays? Navigate Your Health Insurance Costs

When it comes to health insurance, one term you’ll often hear is "copay." A copay is a fixed amount for certain medical services, like doctor visits or prescriptions, while your insurance covers the rest. It’s a way to share the cost of healthcare between you and your insurance provider. In this article, we’ll dive into the details of copays, how they work, and what you need to know to understand your healthcare expenses better.

What Is a Copay?

A copay is a flat fee or fixed dollar amount an insured person must pay upfront for a covered service as part of their health insurance plan. For example, if the copay for a primary care visit is $25 and the doctor charges $100, the patient pays $25 upfront at the time of the visit, and the health plan pays the balance of $75.

Some common medical services that may require a copay include:

• Office visit with a primary care doctor

• Consultation with a specialist

• Prescriptions

• Urgent care visit

• Emergency room visit

Medical services may have different copays, depending on the health plan's terms. Urgent care and ER visits typically have higher copays. For example, your plan may specify a $10 copay for generic drugs, a $25 copay for brand-name drugs, a $25 copay for a visit with a primary care doctor, a $50 copay for a specialist consultation and other services, a $60 copay for urgent care, and a $100 copay for an ER visit or hospital stay.

Understanding Out-of-Pocket Expenses  

Understanding copays is just one piece of the puzzle regarding healthcare costs. Another important factor to consider is your out-of-pocket expenses, which include deductibles, coinsurance, and copays—essentially, what you’re responsible for paying before and after insurance kicks in. Let’s break down how these expenses work and impact your healthcare budget.

What is a Deductible? 

A deductible is the amount an insured person must pay for covered healthcare services before insurance begins paying for medical expenses. For example, if your health plan has an annual deductible of $1,000, you must pay the first $1,000 of your medical expenses during a plan year. After this deductible has been met, the insurance company starts paying all or part of your health care costs.

Copay vs Deductible

As mentioned, a deductible is a set amount you must pay out of pocket for medical expenses before your insurance company starts paying healthcare benefits. Co-pays are fixed dollar amounts charged for covered services.

While copays are typically charged after a deductible is met, some health plans apply a copay immediately.

What is Coinsurance?  

Coinsurance payments are a percentage of the total billed amount for medical services. For example, your health plan may have an 80/20 or 70/30 cost distribution between the insurer and the insured.

Coinsurance payment for out-of-network medical care may be higher than in-network care even though the percentage remains the same. Your insurance company contracts with out-of-network providers, who can charge whatever they want. 

Copay vs Coinsurance

What Are Out-of-Pocket Maximums?  

The out-of-pocket maximum limits how much insurance companies can charge for covered services per year before your health plan covers 100% of the rest. 

How Deductibles, Copays, and Coinsurance Affect Costs 

Let’s say your health plan has an annual deductible of $2,000, a $25 copay for seeing your primary care doctor, a $50 copay for specialist consultation, an 80/20 coinsurance provision, and an out-of-pocket maximum of $5,000.

Here is an example scenario:

You see your primary care doctor at the start of the plan year for preventive care. Per the Affordable Care Act, your policy covers this without copay or coinsurance. 

You mention to your doctor that your shoulder hurts. Your PCP refers you to an orthopedic specialist. The consultation is $250, which you pay out of pocket because you haven’t met your deductible. 

The specialist ordered an MRI, which cost $1,500. You pay the entire amount out of pocket because you still haven’t met your annual deductible. 

The MRI shows a torn rotator cuff that needs to be surgically repaired. The surgery will cost $7,250. After paying $250 to the specialist and $1,500 for the MRI, you need to pay another $250 out of pocket to meet your deductible ($2,000). 

After this, your co-insurance provision kicks in for the balance of $7,000. You pay 20% of the balance, $1,400, and your insurance company pays 80% of the balance, $5,600. So far, you have spent $250 + $1,500 + $1,400 out of pocket (total $3,150).

After the surgery, you need to see another specialist with a consultation fee of $300. You pay the $50 copay, and your insurance pays the balance of $250 after you’ve met your deductible. Your out-of-pocket medical expenses now stand at $3,200.

Let’s say you need another expensive shoulder procedure later that year, which costs $9,000. You pay $1,800, bringing your total payments to the out-of-pocket maximum ($5,000). Your insurance company pays the rest, $7,150, and other expenses.

Tips for Managing Health Care Costs  

Save Money on Medications

• Switch from brand names to generic drugs.

• Ask your doctor if there are less expensive medicines to treat your condition.

• Use manufacturer copay coupons to offset the out-of-pocket cost of prescription drugs. 

• Explore copay assistance programs offered by pharmaceutical companies to patients with commercial insurance.

• Order medicines from an authorized online pharmacy.

• Check prescription discount services, like BuzzRx, for cheaper medication options.

Learn more ways to afford your medications.

Get Routine Health Screenings

Screenings can help detect health problems early when they are treatable and less costly to manage. Preventive care does not require a copay or coinsurance. 

Contact Your Case Manager

Some health plans offer case managers or health advocates. These can help you get the most out of your plan, especially if you have chronic medical conditions such as diabetes, heart disease, or asthma. 

Choose In-Network Providers

Even if your health plan permits out-of-network medical care, you pay less to see providers who are in-network because they have a contract with your insurance company and charge lower fees. 

Your copay may be less for seeing in-network providers versus out-of-network providers.

Plan Ahead

An illness or injury can occur without warning. Set aside money every year for unexpected medical expenses in a health savings account (HSA) or flexible spending account (FSA). You can put pre-tax dollars in these savings accounts and use the funds for eligible healthcare expenses. 

Making Informed Health Insurance Decisions  

Factors to Consider When Selecting a Plan  

When choosing a health insurance plan, consider your and your family’s health needs. Key features to compare include monthly premiums, out-of-pocket costs (annual deductibles, copayments, coinsurance), benefits, provider network, and freedom to seek out-of-network healthcare. 

Generally speaking, the higher the monthly premium, the more your medical expenses are covered. This plan may be a good choice if you have chronic health conditions requiring ongoing care.

Thanks to the Affordable Care Act, most plans cover basic services such as preventive care, maternity care, hospital care, mental health care, lab tests, and prescription drugs. If you are generally in good health and rarely need health care, you may want to choose a high-deductible health plan (HDHP). HDHPs have low monthly premiums and higher deductibles.

Is a Higher Deductible Plan Right for You?

A high-deductible health plan (HDHP) may be a good choice if you are generally healthy, don't need frequent medical care, and want to save on insurance premiums. However, an HDHP may not be the best choice if you have chronic conditions that require frequent medical care. 

You may be a good candidate for an HDHP if you:

• Rarely get sick

• Only require preventive care, like flu shots or health screenings

• Have a good physical and mental health profile

Keep in mind the trade-offs of an HDHP:

• You'll cover the full cost of your health care for most services until you meet the deductible, which is relatively high.

• If you have an unexpected medical emergency, the plan will not cover your expenses until you reach your deductible.

Before choosing an HDHP, carefully consider the potential benefits versus risks. You can also combine an HDHP with a health savings account (HSA) to pay for certain medical services with tax-free dollars. 

Understand Your Plan Details  

Understanding your health insurance plan details is vital because it can help you get the medical care you need while controlling costs. Knowing the meaning of terms such as insurance premiums, deductibles, copays, coinsurance, etc., can help you understand your coverage options, choose the right plan that meets your healthcare needs, compare costs and benefits, and avoid unnecessary out-of-pocket expenses.

Frequently Asked Questions about Copay  

How Does a Copay Work?  

A copay is a fixed dollar amount or flat fee for medical services, such as a doctor’s office visit or prescription medications. 

Do I Have to Meet My Deductible Before Paying a Copay?  

It depends on the terms of your health plan. Some insurance plans require you to pay a copay after you have met the annual deductible. Others require you to make copayments immediately, even before you’ve met the deductible.

What Does $30 Copay Mean?

A $30 copay means paying $30 out-of-pocket for a medical service. For instance, if it costs $200 to see a specialist and your plan specifies a $30 specialist visit copay, you will pay $30 out-of-pocket at the time of your visit, and your insurance provider will pay the balance of $170. 

Is It Better To Have A Higher Deductible vs Out-of-Pocket?

The choice between a higher deductible and out-of-pocket expenses depends on your medical needs. If you are generally healthy and don’t anticipate frequent medical care, choose a higher deductible, resulting in lower monthly premiums.

However, if you anticipate frequent medical needs, a lower deductible may be the better choice, even if you must pay higher monthly premiums. This will reduce your out-of-pocket costs.

Choose a plan with a lower out-of-pocket maximum if you need ongoing medical care or expensive treatments.

What Happens When You Meet Your Deductible But Not Out-Of-Pocket?

You pay coinsurance and/or copay when you meet your deductible but not your out-of-pocket maximum. 

Is Everything Free After A Deductible?

No, medical care is not free after a deductible. Depending on the terms of your plan, you may still have to pay a copay or coinsurance until you reach the out-of-pocket maximum.

Do I Pay Out-of-Pocket Until The Deductible Is Met?

You are responsible for 100% of your medical expenses out of pocket until the deductible is met.

What Does Copay Mean? What Is Meant By Co-Payment?

A copay or co-payment is a fixed dollar amount or set fee that you pay for covered medical services. 

Is It Better To Have A Copay or Deductible?

Most health plans have both a copay and a deductible. A deductible is a set amount of money you pay out of pocket for covered services per plan year before the insurance company starts sharing costs. A copay is also a set amount, but it's a flat fee for certain covered services. A copay may apply both before and after you meet the deductible. 

Do I Have To Meet My Deductible Before Copay?

It depends on your health plan. Some plans apply a copay after you meet the deductible, while others use it immediately.

What Does a $30.00 Copay After Deductible Mean?

A $30 copay after the deductible means you will pay $30 for specified medical services after you have met the deductible. For example, if the deductible is $1,000, you will pay 100% of the first $1,000 of your medical expenses in a plan year. Once you have crossed the $1,000 mark, you will pay $30 for a covered service such as a doctor's visit or prescription.

What Does $100 Copay Mean?

A $100 copay means you will pay $100 for certain covered medical services, and your insurance provider will pay the rest. For example, if you visit the ER and the bill is $500, you will pay $100, and your insurer will pay $400.

Do I Have To Pay A Deductible For A Doctor Visit?

Deductibles are typically set and reset annually. For example, if your deductible is $1,000 and you incur medical expenses of $1,200, you will pay $1,000, and your insurance company will pay $200.

Do Medicare and Medicaid Have Copays?

States can apply copayments, coinsurance, deductibles, and other similar charges on most Medicaid-covered benefits, and the amounts can vary depending on income. According to the U.S. Department of Health and Human Services, Medicaid beneficiaries don’t usually pay anything for covered medical expenses but may owe a small copay for some services. Find out about Medicaid Eligibility.