Copay and Coinsurance are two of the most common terms in health insurance. Yet, there seems to be a great deal of confusion between copay and coinsurance among the general public. Copay, Coinsurance, Deductible, Out of pocket, Stop loss, Limitations etc are some of the ways through which the insurance companies use to eat up customers money. This article gives an insight to these confusing terms.
Copay and Coinsurance
Copay and coinsurance in health insurance terms are amounts paid by the patient while availing a service from a doctor or a medical facility. Even though they seem to be one and the same, there is a big difference between the two. The terms copayment and coinsurance are sometimes confused. Unlike a copayment, which usually consists of a fixed dollar amount, coinsurance is typically a percentage of the total cost of services provided. And, unlike a copayment, which a member pays to a provider at the time of service, the coinsurance amount a member must pay is determined after a claim is filed.
A Copay is a fixed charge the patient has to pay to the doctor or drug store or another medical facility for a single visit. Mostly it is a flat fee. For some of the health insurance id cards, one can see the copay amount written for per visit. This can range from 10$ to 100$ depending on the type of insurance plan you have taken.
Example of copay
Mr Sam is a member of managed care organization that requires a $15 copayment for physician office visits and $10 copayment for prescriptions. Mr Sam goes for a physician office visit for a soar throat. The doctor he is tested and diaganosed for strep throat and the physician writes a prescription for antibiotic.
Before Mr Sam leaves the office, he has to pay $10 copay to the office receptionist and the rest of the charges for the office visit and strep throat test will be covered by the insurance company. He then goes to a pharmacy which is covered in the insurance plans network. As the pharmacist fills the prescription Mr Sam pays $5 copay to the pharmacist. The remaining cost for the antibiotic is covered by the insurance company.
A coinsurance is associated with another insurance term called Deductible. A deductible is a flat amount that a group member must pay before the insurer will make any benefit payments. Most policies contain a calendar-year deductible which specifies that eligible medical expenses incurred during any one calendar year will be subject to the deductible amount specified in the policy.
After the group member has paid the deductible amount, most policies also require the group member to pay a stated percentage of all the remaining eligible medical expenses. This method of cost sharing is known as coinsurance.
Example of Coinsurance
Mr Andy is covered by an indemnity health insurance plan that specifies a $500 deductible and includes a 20% coinsurance provision. Mr Andy became ill, was hospitalized, and incurred $1,500 in medical expenses that are covered by his health plan. Assume that these expenses were the first that Mr Andy incurred during the calendar year. What amount of these medical expenses will Andy pay? What will his health insurance plan pay?
After paying $500 to meet his policy’s deductible, Andy must pay 20% of the remaining balance of $1,000. Mark’s coinsurance payment equals $200. After paying both the deductible and coinsurance, Andy’s out-of-pocket expenses total $700. The insurer will pay the remaining $800
When you are going for an insurance coverage, check how much your out of pocket will be. This is because even if the copay for some servieces are very less, the insurance plans will suck out the last penny from your pocket using deductible and coinsurance.
Published in: Personal Finance