Health insurance jargon can be confusing. But it’s crucial to understand the terminology so that you can make the most of your coverage and choose the plan that is best for you.

Most health care plans don’t cover 100% of your costs on day one. The insurance company expects you to pay for a portion of the services you receive. These payments are called copays and coinsurance.

Let’s look at each of these cost-sharing methods more closely.

What is a copay?

A copay is a set dollar amount that you are required to pay for provider services. This copay is paid directly to the provider at the time of service.

Different providers may have different copays. For example, copays to visit your primary care physician (PCP) are different from copays for specialist office visits. PCP copays are typically lower than those you pay to see a specialist. Specialists include allergists, cardiologists, dermatologists, endocrinologists, gastroenterologists, neurologists, rheumatologists, etc.

You may also have separate copays for visits to physical and occupational therapists, trips to the emergency room or urgent care centers and prescription drugs. Prescription drug copays are often based on the type of drug you purchase. For example, generic drugs cost less than brand-name drugs, so the copayment for a generic drug might be $15 while the copay for a specialty or brand-name drug might be $50 to $300.

What is coinsurance?

Coinsurance is a set percentage you are required to pay for provider services once you have met (or paid) your deductible. A deductible is the set amount you are required to pay each plan year before the insurance company will cover a portion of your charges.

Let’s look at an example of how this works. We’ll assume you're having outpatient surgery that costs $15,000. Your deductible is $2,000 and your coinsurance is 20%. First, let’s calculate your coinsurance:

  • $15,000 - $2,000 deductible = $13,000
  • $13,000 x 20% = $2,600 coinsurance

Now, we’ll calculate how much you owe for the surgery:

  • $2,000 deductible + $2,600 coinsurance = $4,600

Coinsurance is paid directly to the provider once the claim has been processed by the carrier. After you receive care from a provider, you should get an explanation of benefits (EOB) from the insurance company showing the dollar amount you owe before receiving a bill from your provider.

If there is ever any question about how much coinsurance you owe, refer to your EOB. EOBs can be confusing; contact your provider if you need more info. Providers can work with your insurance company to make sure you are not being charged more than is necessary.

Choosing the right plan for you

When selecting which health plan is right for you, consider copays and coinsurance.

  • Plans with low copays and low coinsurance often come with higher premiums. The cost you pay each month for coverage will be more, but your out-of-pocket cost at the provider’s office will be lower.
  • Plans with high copays and high coinsurance often come with lower premiums. The cost you pay each month for coverage will be lower, but you will pay more each time you go to the provider’s office.

If you see your provider a few times a year when you get sick and don’t take any medication on a regular basis, higher copays can spread the cost of coverage throughout the year and may not be an issue for you.

However, if you have a medical issue that requires regular visits to a specialist, lab testing and specialty medication, you may want to consider a plan with lower copays and coinsurance. While coinsurance requires you to absorb more of the cost up front, you may reach the out-of-pocket maximum earlier in the year.

For more information

If you still have questions about copays and coinsurance, talk to your human resources department or benefits adviser. They will be able to explain the details of the plans offered to you.

Blue Ridge Risk Partners is a top 75 independent insurance agency in the United States. With 22 offices and counting throughout Maryland, Pennsylvania, and West Virginia and access to hundreds of carriers, we are able to meet your unique insurance needs.