Do Copays Count Toward the Out-of-Pocket Maximum?

Yes, copays do count toward the out-of-pocket maximum. As of 2014, healthcare reform ensured that all in-network cost-sharing—including copays—applies toward a policyholder’s out-of-pocket maximum. This was a significant shift for copay-based plans and an important factor for employees to understand when managing healthcare costs.

What Is an Out-of-Pocket Maximum?

An out-of-pocket maximum is the highest amount an insured person will pay for covered medical expenses in a single year. Once this limit is reached, the health insurance provider covers 100% of remaining eligible medical and prescription costs for the rest of the year.

What Counts Toward an Out-of-Pocket Maximum?

• Deductibles
• Copayments
• Coinsurance for in-network care and services

How Did Copay Plans Change?

Before 2014, copays for doctor visits and prescriptions did not count toward an individual’s deductible or out-of-pocket maximum. This was a minor issue for people with low healthcare expenses, but for those with frequent prescriptions or doctor visits, it meant consistently paying copays without getting any closer to meeting their deductible or out-of-pocket limit.

Now, under healthcare reform, copays count toward the out-of-pocket maximum, helping policyholders better manage their healthcare expenses.

Example: How Copay-Based Plans Changed

Pre-Reform Copay Plan

Let’s look at Jake, who has:

• Copay-based health plan with 80% coinsurance
• $2,000 deductible
• $3,000 out-of-pocket maximum

Jake's yearly medical expenses:

• Doctor visits: 2 visits ($25 each) = $50
• Specialist visits: 3 visits ($40 each) = $120
• Prescriptions:
  • Medication 1: $30/month = $360
  • Medication 2: $60/month = $720

• Total copays: $1,250 (did not count toward the deductible or out-of-pocket maximum)

Then, Jake is in a car accident and incurs $17,000 in emergency medical bills. His costs break down as:

• $2,000 deductible (out-of-pocket)
• 20% of the remaining $15,000 = $3,000 (due to out-of-pocket max)
• Total paid: $4,250 ($1,250 in copays + $3,000 emergency bills)

Post-Reform Copay Plan

Under the updated rules, Jake’s $1,250 in copays now counts toward his out-of-pocket maximum:

• Emergency room bill total: $17,000
• Jake pays $2,000 deductible + 20% of the remaining $15,000 ($3,000 total)
• Since his copays ($1,250) now count toward his out-of-pocket maximum, he only owes $1,750 in emergency room bills instead of $3,000.

Deductible vs. Out-of-Pocket Maximum: What's the Difference? 

Why Does This Matter?

Most people never hit their out-of-pocket maximum unless they have major medical expenses. However, not all healthcare costs count toward this limit—expenses like infertility treatments or certain elective procedures may still require full payment, even after reaching the cap.

What Employees Need to Know

Employee health insurance has seen significant changes in the past few years. Here are some key takeaways for employees who may have questions about copays and out-of-pocket maximums:

1. Copays count toward the out-of-pocket maximum for all new health plans. If you have really high healthcare expenses, this is a huge positive for you with regards to your overall healthcare expenses for the year. 
2. In most cases, copays do not count toward the deductible. When you have low to medium healthcare expenses, you’ll want to consider this because you could spend thousands of dollars on doctor visits and prescriptions and not be any closer to meeting your deductible. 
3. Better benefits for copay plans mean higher costs. You’ll want to factor in paying more in premiums for the benefit of copays counting toward the out-of-pocket maximum.

Likewise, here are some tips for employees on how to protect themselves from unnecessary healthcare costs:

1. Always check your networks before visiting a medical facility. Check to make sure your favorite providers are in-network before purchasing a new health plan. This includes the emergency room.

2. Check your health plans list of services that are not covered. On some, mental health won't be covered. Others, won't cover infertility treatment. Most won't cover acupuncture. If you are unsure about something you want to have done, check your insurance first so you can know the costs upfront.

3. Know whether or not you need pre-authorizations for services. If you have an HMO plan, it's likely that you need your preferred provider to sign off before you see a specialist or have any kind of scan or special test run. Some plans will require a doctor to declare that mental health treatment is a medical necessity before you can see a mental health professional or seek treatment. Every plan is different, so it's best to read all the details on your plan.

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