Health Insurance

Copays, Deductibles, and Coinsurance

Health insurance expenses can be broken down into several categories: premiums, deductibles, copayments, and coinsurance. Understanding how these payments work and when you have to pay them helps you stay ahead of your health care costs.

AdobeStock 103084496

Health insurance premiums, copayments, coinsurance, and deductibles are all health care and insurance coverage expenses that you have to pay. Understanding what each of these is and when you’re expected to pay them can help you avoid financial surprises and make the most of your health insurance.

Understanding Your Premium

What Is an Insurance Premium?

An insurance premium is the amount of money you pay to have a health insurance plan. While it’s most often a monthly payment, some people pay premiums with each paycheck. Consider it an enrollment fee or payment for membership in that insurance program.

There are many different types of health insurance, including private insurance, marketplace policies, Medicare, and Medicaid. Private and marketplace policies have premiums that are paid by the individual, their employer, or a combination of both. Medicare and Medicaid are more complex as there are different programs within those umbrellas, and while some have premiums, some don’t.

What Is Your Premium and When Do You Pay It?

If you’ve had the same insurance for a while but aren’t sure what your premium is, there are a few ways you can check on it. If you have an employer-sponsored insurance plan, the first step is to check your paycheck stubs for an itemization of your gross pay and what’s being taken out for taxes, insurance, and other routine fees. If it’s not listed on your pay stub, the human resources or payroll office can help.

Another method is to look at your initial insurance paperwork or check your online profile. If you aren’t able to find the information there, calling the insurance number on your card and asking them for the information is another route.

Remember to ask about payment frequency when it comes to your premium. You may be told you’re paying $200, but that could be a bi-weekly or monthly payment. To be sure you have the right numbers, ask for your monthly and annual premium amounts.

If you’re getting insurance for the first time or switching plans, the premium is one of the key data points you’ll want to review. This is often a determining factor for people who are looking to switch policies.

Understanding Your Copay

What Is a Copay?

Copayments are a fixed fee that you pay for certain types of health care appointments or services, such as every time you visit a doctor. It’s not connected to or a part of your deductible and it’s not a percentage of your bill.

If you’re trying to gauge the costs of insurance plans, it’s important to note that not all insurance plans have copays, which can make this amount an important figure in your overall calculations.

What Is Your Copay and When Do You Pay It?

Broadly speaking, a copayment is the amount of money you will pay for a covered healthcare service. This amount is predefined by your insurance policy, and it can vary based on the service you’re receiving.

Copayment amounts can vary by the type of doctor you’re seeing, the services you’re receiving, whether or not you’ve met your deductible, and if that doctor is in your health care plan or out of network. There are also some appointments that don’t require a copay, but that depends on individual health care plans.

If your insurance policy has a network — a group of preferred health care providers — then you’ll be incentivized to use providers within their network as your copay will most likely be lower or free. If your doctor isn’t in the network, there could be a higher copay, or you might be responsible for the entire bill.

Your copayment amount is paid directly to your healthcare provider, not the insurance company. Many clinics require copayments at the time of your appointment, but some offices may bill your insurance first and then send you a bill for the copay amount afterwards.

Understanding Coinsurance

What Is Coinsurance?

Coinsurance is like a copayment in that it’s an amount you’re expected to pay for each visit or service. The difference is that it’s not a set amount. Instead, it’s a percentage of the cost of the entire service.

If your insurance has coinsurance, once your deductible is met, you and your insurance company will be splitting your bills based on a percentage. For example, if your bill was $100 dollars and you have an 80/20 coinsurance, then your insurance company will pay 80% of the expenses, or $80, and you’ll be responsible for the remaining $20.

What Is Your Coinsurance Rate and When Do You Pay It?

An 80/20 coinsurance split is common, but it’s not the only option available. Because this percentage breakdown directly impacts how much you’ll pay toward health care, it’s important to understand what each plan offers for coinsurance. This information can be found in your policy, or you can call your insurance carrier and they’ll be able to tell you your percentage(s).

You may find that there are different percentage breakdowns in your policy. For instance, your insurance provider may cover more of the costs if you visit an in-network provider instead of an out-of-network provider, or they might cover less for prescriptions that aren’t part of their approved medications. These variances in your coinsurance will be spelled out in the policy.

Most doctor’s offices will not bill you for your percent of the charges on the date of service. Instead, they’ll invoice the insurance carrier to get a more definitive answer on what you owe and bill you afterwards.

Understanding Your Deductible

What Is a Deductible?

Deductibles represent the amount of health care expenses that you’re required to pay out of pocket before your insurance will cover the charges. For example, if your insurance deductible is $5,000, then you’ll have to incur and pay $5,000 in medical expenses in the plan year before insurance pays for your care. Individual plans have different requirements, so it pays to understand your plan specifically.

Many plans have both a family deductible and an individual deductible. This means that if your spouse has a lot of medical bills and meets the family deductible amount, you will get insurance coverage without meeting the individual deductible.

Services can be treated differently, too. Sometimes annual checkups and other routine appointments are 100% covered even if you have not met your deductible. For services that aren’t considered medically necessary, your insurance will not apply the charges towards your deductible.

What Is Your Deductible and When Do You Pay It?

Your deductible amount is a predetermined amount you’ll be expected to pay each year before insurance kicks in. Deductibles start fresh each plan year, meaning they will need to be met annually.

If you haven’t kept track of what you’ve paid toward your deductible, but would like to know what it is, your insurance company can give you that information. You’ll also see detailed information on how medical bills were divided in your explanation of benefits (EOB) for each doctor’s visit.

The doctor’s office does not keep track of how much of your deductible is paid because they’re not aware of any other doctors you’ve seen. This means that they usually won’t charge you on the day of your appointment. Instead, they will bill your insurance company, which will process that claim and determine what you owe and what amount, if any, they owe. This information will be returned to you and your doctor’s office in the EOB. Then, you will be billed by the doctor’s office for your portion of the charges.

What Should You Consider When Choosing Your Deductible?

Deductibles can be a deciding factor in selecting insurance because they play a big role in how much money you’ll spend on your insurance in a few different ways.

Some insurance companies offer a higher annual deductible, but the insurance policy comes with a much lower premium, making monthly payments more affordable. If you’re younger and/or in good health, you might want to take advantage of this and select high deductible insurance with low monthly payments because it can be more cost-effective. Then, even if you do have an unexpected medical event, there is still some coverage after the deductible is met.

On the other hand, if you’re not in great health or have a family member in poor health, you may want to go the other route. You’ll be paying more monthly on your premiums, but your individual or family deductible will be lower and easier to meet so insurance can step in and help cover costs sooner.

What Are Out-of-Pocket Maximums?

An out-of-pocket maximum is an amount that your insurance decides is the most you’ll be expected to pay toward your health care. The term “out of pocket” is used regularly when discussing insurance and how much the insured person is responsible for paying. Out of pocket means the amount you will directly be responsible for, whether that is upfront costs due to your deductible, costs that you incur along the way from coinsurance and copayments, or amounts that aren’t accepted or covered by your insurance.

After you’ve hit your out-of-pocket maximum, your insurance will step in and pay 100% of your charges. But the following expenses do not count toward your out-of-pocket maximum and you’ll have to keep paying for these:

  • Premiums
  • Services not covered by your plan
  • Out-of-network care and services
  • Costs deemed above the covered amount by your insurance

Your premiums aren’t considered part of your out-of-pocket expenses, but your deductible, coinsurance, and copayments are all part of this total.

The out-of-pocket maximum amount varies by insurance plan. If you have a family plan, you might discover that there is a family out-of-pocket amount, too. This means that every family member on that plan contributes toward reaching the maximum dollar amount. For example, if you had no medical bills from January to March but your spouse had surgery in March and hit the out-of-pocket max, after that point, you’re both covered by the insurance at 100%.

All About In-Network and Out-of-Network Costs

Some insurance companies work on a network or on a preferred provider basis. This means they have contracts with specific doctors and health care facilities. The contracts often have a financial benefit that ensures the doctors will get patients from the insurance company and in return, the insurance company will receive discounts for patients from that insurance provider.

The doctors your insurance has a contract with are considered in network and the others are out of network. An insurance company cannot tell you which doctors you have to see, but there are incentives for going to someone in network. The primary incentive is it will most likely cost less to be seen by an in-network doctor.

In fact, some plans won’t cover any expenses from out-of-plan providers, nor will they accept your expenses as part of the deductible. Other plans will contribute to the expenses, but you’ll have to pay a higher copayment or a larger percentage of the coinsurance.

There are many different situations that might prompt you to seek care outside of your network, including:

  • Your preferred doctor isn’t in the network
  • Your regular doctor or hospital ends their network contract
  • You are traveling to out-of-network regions
  • You want to see a specialist
  • You received a referral to an out-of-network clinic
  • Your insurance changed, but you don’t want to change doctors

There’s nothing wrong with seeing a doctor that is out of your insurance’s network, but keep in mind that you will be responsible for a greater amount of the fees.

Each insurance policy has a different approach to out-of-network services. Some will pay a portion of your charges while some won’t cover any of them. Knowing how your insurance treats out-of-network situations before care can help you prepare for these expenses, and also help you decide which policy to select if you’re changing insurance providers.