Copays vs. Coinsurance: What's the Difference?
Health insurance costs don't stop at your monthly premium. Even with coverage, you may still pay for doctor visits, prescriptions, procedures, and other medical services.
Two terms that often cause confusion are copays and coinsurance. Both describe the portion of healthcare costs you are responsible for, but they calculate that cost differently.
Understanding how they work, along with your deductible and out-of-pocket maximum, can help you figure out what a health insurance plan may actually cost you.
What Is a Copay?
A copay, short for copayment, is a fixed amount you pay for a specific healthcare service. Your insurance plan sets the amount, so you generally know what you'll owe before receiving care.
For example, your plan might charge $25 for a primary care visit, $50 for a specialist, or $15 for certain generic prescriptions. The amount doesn't change based on the full price of the service, as long as the service is covered and the plan's copay applies.
Copays are common for routine visits and prescriptions, although some plans also use them for other services. Depending on your coverage, you may have to meet your deductible before certain copays apply.
What Is Coinsurance?
Coinsurance is your share of a covered medical expense, calculated as a percentage of the cost rather than a fixed dollar amount.
For example, if your plan has 20% coinsurance and the allowed cost of a covered service is $1,000, you would pay $200 while your insurance pays the remaining $800.
Unlike a copay, the amount you owe can change depending on the cost of the service. A percentage of a $200 bill is much different from the same percentage of a $5,000 bill.
Coinsurance commonly applies after you've met your deductible, although the exact rules depend on your plan.
How Deductibles, Copays, and Coinsurance Work Together
These three terms are connected, but they don't mean the same thing.
Your deductible is the amount you must pay toward eligible healthcare expenses before your plan begins sharing certain costs. Your copay is a set fee for a service, while coinsurance is a percentage of the allowed cost that you pay.
A plan might require you to pay the full negotiated cost of certain services until you meet your deductible. After that, you may owe coinsurance. Other services, such as certain office visits or preventive care, may be covered with a copay or at no cost before you meet the deductible.
The order and rules vary by plan, so don't assume every service follows the same process. Your plan documents explain which costs apply and when.
How These Costs Affect Your Choice of Health Plan
When comparing health insurance, it's easy to focus on the monthly premium. But a plan with a lower premium isn't automatically the least expensive option.
Consider two hypothetical plans:
Plan A | Plan B | |
Monthly premium | $100.00 | $50.00 |
Deductible | $2,500 | $2,500 |
Primary Care Visit | $20 copay | 10% coinsurance |
Specialists | $30 copay | $20 copay |
X-Ray | $45 copay | 20% coinsurance |
Outpatient Services | $200 copay | 40% coinsurance |
Plan B gives you the lowest monthly price, at the exchange of having coinsurance.
So, if you need to see a primary care you would pay 10% of what the provider charges you. With Plan A, you pay a set $20 per visit every time.
So while Plan B may save you monthly, if a provider charges $350 for your appointment (yes, this happens) you will be responsible for $35 (10%) upfront.
This can be reasonable for a small bill appointment, but for something bigger like needing a surgery or going to the emergency room, a coinsurance can quickly become costly. If you get a surgery under Plan B that bills your insurance $5,000, you will be responsible $2,000 (40%) rather than the set copay of $200 from Plan A.
Common Costs and Mistakes to Watch For
Even with insurance, you can still have significant medical expenses. High deductibles, coinsurance, uncovered services, out-of-network providers, and prescription costs can all add up.
One number worth paying close attention to is your out-of-pocket maximum. This is generally the most you will pay during a plan year for covered, in-network essential health benefits under your plan's rules. Once you reach that limit, your plan generally pays 100% of covered services for the rest of the plan year. Monthly premiums, noncovered services, and certain out-of-network expenses generally don't count toward it.
When comparing plans, look at the entire cost picture: premiums, deductibles, copays, coinsurance, prescription coverage, provider networks, and the out-of-pocket maximum.
Also check whether your doctors, hospitals, and medications are included. A plan that looks affordable on paper may be a poor fit if it doesn't cover the care you need.
Too Long, Didn't Read Recap
A copay is a set fee.
Coinsurance is a percentage of the bill.
Your deductible determines when your insurance starts sharing certain costs, and your out-of-pocket maximum puts a cap on what you generally pay for covered, in-network care.
A visit that bills your insurance $4000 with a 10% coinsurance means you pay 10% of that $4,000 (so $400).
A visit that bills your insurance $4000 with a $100 copay means you pay $100 of that $4,000.
When shopping for health insurance, don't let a cheap monthly premium fool you. Look at the whole picture: what you'll pay to see a doctor, fill a prescription, or deal with an unexpected medical bill. Because the real cost of insurance isn't just what you pay every month. It's what happens when you actually need it.
Up Next: Now that we've covered some health insurance basics, we're moving into specific types of coverage. First up: auto insurance, including why it matters, what happens when you drive without enough coverage, and how liability protection can help protect your finances.
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