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What's the Difference: Copays, Deductibles, Coinsurance

What's the Difference: Copays, Deductibles, Coinsurance

Copays, deductibles, and coinsurance are all out-of-pocket expenses that represent the portion that an individual is required to pay either before or after health insurance covers additional costs. Understanding how each works and what is required can help you choose the right plan for you and your family and plan better financially. 



What Is a Copay? 

A copay is a fixed price that a health insurance plan establishes for different types of health services. Each type of health service can have a distinct copay value. For instance, a visit to your primary care doctor may have a $20 copay, whereas a visit to a walk-in clinic may have a $50 copay.  An individual on a copay insurance plan will know the price of each visit prior to stepping foot in the office.


What Is a Deductible?

A deductible is a fixed dollar amount that an individual must pay toward medical expenses each plan year before their health insurance company will contribute. The percentage of their contribution after meeting their deductible will vary depending on the plan. 

For instance, let’s say your plan has an annual deductible of $3,000. You would have to pay $3,000 in medical expenses before your health insurance will assist with expenses. Meaning, you will be required to pay 100% of your services until you meet this amount. Services can include hospital visitations, surgeries, lab tests, MRI or CAT scans, etc.

After the $3,000 deductible is met, the insurance company will begin to share the expenses, IF the service is in-network and covered by your insurance. If it’s out-of-network, then you will still be responsible for the full amount. If there are dependents on your insurance plan, there could be both individual and family deductibles. See this article for more information about family deductible plans.

After the deductible is met, some plans will split additional medical expenses with you 50/50. Some, 80/20. Others will even cover 100% after the deductible is met. However, while one plan may appear better than another, keep in mind that a plan that may seem more favorable will likely have higher monthly premiums

There are also some services that will be covered prior to a deductible being met, such as certain types of preventative care, like an annual check-up. 


What Is Coinsurance? 

Coinsurance is the amount that an individual will pay after meeting their deductible. This value will be a percentage of the total cost of care. For example, let’s say your insurance plan covers 80% of expenses after the deductible is met. You would then be required to only pay 20% of the costs, until you reach your out-of-pocket maximum, which is the total limit you’d have to pay within the plan year. All other costs that exceed that limit will be the responsibility of the health insurance company. 


Example Using a Deductible, Copay, and Coinsurance 

Let’s say your health insurance plan consists of a $2,500 deductible, $50 copays, 50/50 coinsurance, and a maximum out-of-pocket limit of $5,000.

You have your annual check-up with your primary care; this service is free as it’s a preventative service. During your check-up, you mention that you’ve been experiencing some pain when you swallow, so your doctor refers you to an ear, nose, and throat specialist (where you pay a copay of $50). 

During that visit, the specialist reviews your symptoms and physical ailments and diagnoses you with tonsillitis. The doctor decides that your case requires surgery, and schedules you for a tonsillectomy, which costs $8,000.

Let’s say that you have not yet paid anything toward your deductible. The first $2,500 is completely out of pocket. Then, coinsurance kicks in, and you are required to pay 50% of the additional costs, NOT exceeding $5,000 out of your own pocket. 


Here is the breakdown:

Deductible (paid by you): $2,500

Additional costs: $5,500

Coinsurance(50/50): $2,500 (paid by you)

                      $2,500 (paid by insurance company)

*Out-of-pocket maximum is now hit. 

 $2,500 deductible + $2,500 (50/50 coinsurance plan) = $5,000 (maximum out-of-pocket)

Remaining costs after out-of-pocket maximum is hit: $500


The insurance company will then pay the remaining $500. For the remainder of the plan year, you will not need to pay for any more health service expenses. You would only be required to pay for a service if it were out-of-network. 


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How to Save Money on Your Insurance Plan

Understanding how deductibles and out-of-pocket maximums work for each plan year can wind up saving you large sums of money. 

For instance, let’s say you hit your out-of-pocket maximum part-way through the year, and you know that you need to schedule a surgery to get your wisdom teeth out. Scheduling the appointment during the same plan year will save you thousands of dollars. Whereas, if you were to wait until the following year, you would likely wind up paying for either the entire surgery, or a large portion of it. 


Additional Resources

You can stay informed, educated, and up-to-date with important HR topics using BerniePortal’s comprehensive resources:

  • BerniePortal Blog—a one-stop-shop for HR industry news
  • HR Glossary—featuring the most common HR terms, acronyms, and compliance
  • HR Guides—essential pillars, covering an extensive list of comprehensive HR topics
  • BernieU—free online HR courses, approved for SHRM and HRCI recertification credit
  • HR Party of One—our popular YouTube series and podcast, covering emerging HR trends and enduring HR topics


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