Deductible vs. Copay vs. Coinsurance: What’s the Difference?

So, you have reviewed your options, chosen a health plan, and selected your doctors. But when you visit a doctor, you are still getting charged. What gives? Even after choosing a health insurance plan that works for you, understanding the different fees, such as deductibles, copayments (also known as copays), and coinsurance, can be challenging.

Here is a guide:

What Is a Deductible?

A deductible is the amount you must pay each year before your health insurance begins to pay. You must meet your deductible before your health insurance begins to pick up its portion of the tab for your care.

For example, if you sprain your wrist and visit an orthopedist who then orders an MRI, you are likely to get two bills, one for the orthopedist visit, and another from the facility that did the MRI. Let's say the orthopedist's bill is $500 and the MRI is $1,000. If your policy includes a deductible of $1,000, you will need to pay the full $500 of the orthopedist's bill (since you got that service first), and $500 of the bill for the MRI. After you have paid that $1,000 out of pocket your insurer will pay its portion of the remaining $500 of the MRI bill, plus its portion of your covered medical bills for the remainder of the year.

One exception to the need to meet your deductible is preventive care such as mammograms, annual wellness exams, and vaccinations, your insurer will often cover these 100%. It is important to note that the amount an insurer pays for these services does not count toward your deductible.

What Is a Copay?

Some insurance plans charge a copay — a fixed, flat fee for certain kinds of office visits, prescription drugs, or other services which does not apply to your deductible.

Going back to that sprained wrist example, let's say your plan has a $50 copay for specialists and a $100 copay for imaging services such as x-rays and MRIs.

If you have not yet met any of your $1,000 deductible, here is what you would need to pay out-of-pocket:

• The $500 bill for your orthopedist, however, $50 of this (your copay) will not apply toward your deductible. After you pay this bill, you will have met $450 of your deductible.
• $750 of the bill from your MRI. Remember since your copay is $100 and the copay on your orthopedist's bill was $50, these amounts together ($150) do not apply to your deductible.
• This means you will need to pay $1,150 out of pocket to meet your $1,000 deductible.
• Your insurer will then pay the remaining $350 of your MRI bill.

Once your deductible has been fulfilled, you will still need to pay a copay for future services. For instance, if after your wrist heals you get a sinus infection and go to your main (primary care) doctor for treatment and your insurer has a $25 copay for visits to your primary care doctor, you will need to pay $25 before the insurer picks up its portion of the bill. Note that if you go to out-of-network healthcare professionals, the co-pay is usually significantly higher.

A copay is a fixed amount, so you have peace of mind knowing how much you will be charged for each visit. Copays generally, but not always (check with your plan), apply to:

• Office visits with a primary care provider for non-preventive care
• Office visits with a specialist
• Prescriptions
• Physical therapy
• Occupational therapy
• Speech therapy
• Mental health in-office services such as psychotherapy or drug counseling
• Ambulance or emergency room services

Your copay may also vary depending on the service you get. For example, your plan may specify a $150 copay for emergency room visits, a $10 generic copay for generic prescription drugs, and a $20 copay for brand-name drugs.

What Is Coinsurance?

Usually, an insurer will either charge copays or coinsurance, rarely both.

Coinsurance is typically a percentage of the healthcare provider's bill that you must pay after you have met your deductible. For instance, a common coinsurance plan is 80/20, meaning your insurance will cover 80% of a bill and you will be responsible for 20%. It applies only to services your insurance plan covers and at the rates that your health insurer has agreed to with the health care provider.

If your plan includes coinsurance instead of co-pays and the same $1,000 deductible, your sprained wrist will cost you out of pocket:

• $500 for the orthopedist
• $500 for the MRI plus 20 percent of the remaining $500 of the MRI bill ($200)
• Your total out-of-pocket cost would be $1,200

If you use an out-of-network health care provider, you may encounter additional fees.

Because out-of-network providers have usually not agreed to accept what your insurer pays, they may also bill you for the balance, for which you will be responsible. For instance, if your orthopedist was out of network and charges $700 for a wrist exam, your insurer may decide that it will only pay its portion (80% in the above example) of its usual fee for that service. If the usual fee the insurer pays is $500, for instance, the insurer may send $400 to the orthopedist. The orthopedist would then bill you $100 for your 20 percent of the bill plus an additional $200.

Out-of-Pocket Maximum

Most health insurance plans have an annual out-of-pocket maximum. Once you meet that limit through the combination of deductible, copay, and coinsurance payments, your insurance plan pays the entire cost of covered services for the rest of the year.

Even after choosing a health insurance plan that works for you, consider additional ways to make manage your medical bills. One option to help manage your medical bills is healthcare financing through the CareCredit credit card.* Apply today and continue your wellness journey by downloading the CareCredit Mobile App to manage your CareCredit account, find a provider on the go, and easily access the Well U hub for more great articles, podcasts, and videos.

Our Expert Reviewer

Patty Caballero and her team of consultants together have more than 35 years of health insurance knowledge working for some of the biggest health insurance companies in the US. She has knowledge in building brands and strategic initiatives to help consumers better understand their health benefits.

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