What Is Copay In Health Insurance? A Complete Guide For You

Signed up for health insurance, but still unsure about what company is? Continue reading as we tell you all there is to know about copay in health insurance.

A contract requiring an insurer to pay some or all of a person’s healthcare bills in exchange for a premium is known as health insurance. More specifically, health insurance often pays for the insured’s medical, surgical, prescription drug, and dental expenses. Health insurance can pay the care provider directly or compensate the insured for expenses incurred as a result of illness or accident.

It’s frequently included in employee benefit packages as a way to entice top talent, with premiums partially covered by the business but frequently withheld from employee paychecks. With limited exclusions for S company employees, the cost of health insurance premiums is deductible to the payer, and the benefits received are tax-free.

How does health insurance work?

It might be difficult to understand health insurance. For the maximum level of coverage, managed care insurance plans require policyholders to receive care from a network of certified healthcare providers. Patients must pay a higher percentage of the cost if they seek care outside the network. In some situations, the insurance company may refuse to pay for out-of-network services altogether.

Many managed care plans, such as health maintenance organizations (HMOs) and point-of-service plans (POS), require patients to select a primary care physician to oversee their care, provide treatment recommendations, and refer them to medical specialists. In contrast, preferred-provider organizations (PPOs) do not require referrals but have lower rates of in-network practitioners and services.

Certain services provided without prior authorization may also be denied coverage by insurance carriers. In addition, if a generic version or comparable prescription is available at a cheaper cost, insurers may refuse to pay for name-brand pharmaceuticals. All of these restrictions should be specified in the insurance company’s materials and should be thoroughly reviewed. Before making a large purchase, check with your employer or the company directly.

Copays, that are set fees that plan subscriptions must pay for services such as doctor visits and prescription drugs; deductibles, which must be met before health insurance will cover or pay for a claim; and coinsurance, which is a percentage of healthcare costs that the insured must pay even after they’ve met their deductible, are all becoming more common in health insurance plans (and before they reach their out-of-pocket maximum for a given period).

Monthly rates for insurance plans with larger out-of-pocket expenditures are often lower than for policies with low deductibles. Individuals must consider the benefits of decreased monthly payments against the danger of big out-of-pocket expenses in the event of a serious illness or accident when looking for policies.

High-deductible health plans (HDHP)

A high-deductible health plan is a type of health insurance that is becoming increasingly popular (HDHP). Higher deductibles and lower rates characterize these insurance plans. A high-deductible health plan, according to the IRS, is one with deductibles of at least $1,400 for an individual or $2,800 for a family in 2021. Individual maximum out-of-pocket expenses are $7,000, while a family’s maximum out-of-pocket expenses are $14,000.

The deductible limitations will not change in 2022. The out-of-pocket maximums, on the other hand, will rise to $7,050 and $14,100, respectively. Out-of-network services are not subject to out-of-pocket maximums.

High-deductible health plans have a distinct advantage in that they allow you to form a health savings account and deposit pretax income to it, which may be used to pay for qualified medical expenses. These schemes provide a three-fold tax benefit:

  • Contributions are deductible for tax purposes.
  • Contributions are tax-deferred and grow over time.
  • Tax-free withdrawals for qualified medical expenditures

In addition to health insurance qualified sick persons can benefit from a variety of auxiliary goods on the market. Disability insurance, critical illness (catastrophic) insurance and long-term care (LTC) insurance are examples.

After age 65, you can withdraw money from an HSA without penalty for any purpose, however, you will owe income tax if the money is not used for eligible medical expenditures.

Special considerations

The Affordable Care Act (ACA) was signed into law by President Barack Obama in 2010. 6 Medicaid, a government program that provides medical treatment to those with very low incomes, was expanded in participating states under the legislation. The ACA also established the federal Health Insurance Marketplace in addition to these measures. It also made it illegal for insurance companies to refuse coverage to patients with previous diseases, and it enabled children to stay on their parent’s insurance until they turned 26.

Individuals and businesses can use the Marketplace to find quality insurance plans at reasonable prices. The legislation requires that insurance purchased through the ACA Marketplace cover ten essential health benefits. Shoppers can find their state’s Marketplace on the HealthCare.gov website.

Changes in the affordable care act

Americans were obliged to have medical insurance that met federally defined minimum requirements under the Affordable Care Act (ACA), but Congress repealed that requirement in December 2017. In 2012, the Supreme Court threw down an ACA provision that obliged states to expand Medicaid eligibility as a condition of receiving federal Medicaid funding, and a number of states elected to decline.  By 2021, the Affordable Care Act will have covered an estimated 31 million people.

Medicare and CHIP

Medicare and the Children’s Health Insurance Program (CHIP) are two governmental health insurance programs that serve elderly people and children who require health insurance. People with disabilities can also benefit from Medicare, which is available to anyone aged 65 and up. The CHIP plan covers babies and children up to the age of 18 and has income limits.

What is health insurance and why do you need it?

In exchange for a premium, you enter into an arrangement with an insurer to have them pay for some or all of your medical bills. Medical expenditures that you can’t afford to pay out of pocket can be avoided with health insurance.

Who needs health insurance?

If your employer offers health insurance as part of an employee benefits package, you may be covered by it. You can also purchase health insurance through the Health Insurance Marketplace. Certain individuals may qualify for health insurance coverage through Medicaid or Medicare programs

How do you get health insurance?

You may be insured if your employer provides health insurance as part of an employee benefits package. Health insurance can also be purchased through the Health Insurance Marketplace. Certain people may be eligible for health insurance through Medicaid or Medicare programs.

How much does health insurance cost?

The scope of coverage, the type of plan you have, and your deductibles can all affect your health insurance expenses. Copays and coinsurance can add to the cost, so think about how much you’ll pay before signing up for a healthcare plan.

What is copay or copayment in health insurance?

A copay is a set sum paid out of pocket by an insured for covered treatments. Many health insurance policies include it as a standard feature. Co-pays are frequently charged by insurance companies for services such as doctor visits or prescription medicines.

Copays are a fixed dollar amount paid at the time of service rather than a percentage of the bill. A company is not required for all medical services. Some insurance providers, for example, do not charge a copay for annual physicals.

How does copay work?

The cost of a copay varies by insurer, although it is usually $25 or less. A copay plan, for example, might require the insured to pay $25 every doctor visit or $10 per prescription. To determine your copayment option, look over the conditions of your insurance policy.

If a copay option is available, it may include payments for physician appointments, emergency room visits, specialist visits, and other medical services. For appointments with out-of-network physicians, insurance companies frequently demand higher copays. It’s crucial to understand how much out-of-network providers charge for copays, especially if you’re going to see them on a regular basis.

Copay amounts might alter year to year, so it’s worth checking with your insurance company or HR department to see whether they’ve increased when the new year starts.

How do copays affect insurance premiums?

The amount paid for an insurance policy is referred to as a premium. Low co-pays are more common in plans with relatively high premiums, while high co-pays are more common in plans with low premiums.

How do copays and deductibles affect each other?

A deductible is an amount paid out of pocket by an insured party before an insurance company pays a claim. If your deductible is $5,000, for example, you will spend all of your medical expenses until you reach that $5,000 maximum. Your insurance company will then cover the costs, minus your copay or coinsurance.

Assume your copay is $20 for each medical appointment. The cost of seeing a doctor is $200. You are responsible for the entire appointment if your deductible has not been met. If your deductible has been met, you will only have to pay a $20 copay. Unless a cost is not necessary, such as in the case of an annual physical, every member of your family will be expected to pay a copay for their medical visits.

How do copays and coinsurance work together?

Another out-of-pocket expenditure that many health insurance policyholders face is coinsurance. Coinsurance is a proportion of the overall visit cost, rather than a fixed charge amount like copays. For the same medical appointment, some health insurance policyholders pay both a copay and a coinsurance.

As an example, picture getting a filling from the dentist. Your dental insurance requires a $20 co-pay for each appointment, as well as a 20% coinsurance fee for fillings. You pay a $20 copay and a $40 coinsurance for a total of $60 for a $200 dentist appointment.

Coinsurance vs. copays: what’s the difference?

Coinsurance and copays are two crucial concepts to know when it comes to figuring out how much health insurance costs. These and other out-of-pocket expenses have an impact on how much you’ll pay for healthcare for you and your family.

To begin, knowing about deductibles can help you comprehend the difference between coinsurance and copays. A deductible is a defined amount you pay for healthcare each year before your plan begins to share the costs of covered services. If your deductible is $3,000, for example, you must pay $3,000 before your insurance kicks in fully.

If you have any dependents on your policy, you’ll have a separate deductible for each of them, as well as a distinct (higher) deductible for the whole family. You may be able to save money in a tax-advantaged Health Savings Account if you have a high-deductible health plan.

What is coinsurance?

After you’ve met your deductible, coinsurance is the percentage of covered medical expenses you pay. The rest is covered by your health insurance plan. If you have an “80/20” plan, for example, it implies your plan pays 80% of your costs and you pay 20% — up to your maximum out-of-pocket limit.

Coinsurance, on the other hand, only applies to covered services. You’ll be responsible for the entire payment if you have charges for services that the plan doesn’t cover. Review your benefits booklet or call your plan provider if you’re not sure what your plan covers.

What are copays?

When you obtain medical services, you pay a specific sum to your medical provider called a copay (or copayment). Depending on the sort of service you receive, copays usually start at $10 and go up from there. Office visits, specialist visits, urgent care, emergency hospital visits, and medicines all have different copays.

Even if you haven’t reached your deductible, you will be charged a copay. If you have a $50 specialist copay, for example, you’ll pay it regardless of whether you’ve met your deductible. Most plans cover preventative care completely, so you won’t have to pay anything.

Coinsurance vs. copay

Copays and coinsurance are two ways your health insurance company may make you pay for approved services. The following are the distinctions:

Copay Coinsurance
Flat fee for a particular kind of visit, like seeing your primary care doctor or going to urgent care. The price varies since it’s a percentage of the total cost of services, based on the final approved bill.
Paid every time you see a care provider or fill a prescription. Billed by the care provider after insurance approves the charges and your percentage has been calculated.
May or may not count toward your deductible. You don’t pay this until after you’ve met your deductible — up to the out-of-pocket max

Copay and coinsurance example

Here’s a simplified example to help you understand copays and coinsurance.

Assume you have a $3,000 deductible, $50 specialist copays, 80/20 coinsurance, and a $6,000 maximum out-of-pocket limit on an individual plan with no dependents.

You go in for your annual checkup (which is free because it is a preventive service) and tell the doctor about your shoulder pain. Your doctor refers you to an orthopedic specialist for a second opinion (for a $50 cost).

To figure out what’s wrong, that specialist suggests getting an MRI. The MRI will set you back $1,500. You pay the full amount because your deductible has not yet been met.

It turns out you have a torn rotator cuff, which will require surgery to repair. The operation will set you back $7,000. You’ve already paid $1,500 for the MRI, so you’ll only have to pay $1,500 of the operation fees to fulfill your deductible and get your coinsurance. Following that, your portion is 20 percent or $1,100 in this case. Your ruptured rotator cuff will set you back $4,100 in total.

Copay vs. deductible

Copays and deductibles may be included in your health plan, and whether you pay one or the other depends on the services you receive. A predetermined copay, such as $10 or $20, may be required for specific treatments, such as a visit to your primary care physician. You may be required to pay the approved cost of the service up to your deductible for other services, such as an MRI.

It’s possible that your company will help you meet your deductible, but it’s not always the case. After you’ve met your deductible, you might owe copays for some procedures.

Coinsurance vs. deductible

Deductibles and coinsurance are used in tandem, but usually in that order. The deductible, as previously stated, is the amount you pay before your insurance begins to cover the cost of your health care. You’ll often owe coinsurance (such as 20% of authorized charges) on all subsequent services for the rest of the year once you’ve met your deductible.

You’ll pay coinsurance on approved medical care until you reach your plan’s out-of-pocket maximum, after which your insurance will cover 100 percent of your care for the rest of the year.

How it all works together?

A range of cost-sharing alternatives is available in health insurance packages. Some insurance, for example, has cheap premiums, high deductibles, and high maximum out-of-pocket limits, whereas others have higher premiums, smaller deductibles, and lower maximum out-of-pocket limits.

In general, health insurance works like this: you pay a monthly premium to have coverage. Then, when you visit the doctor or the hospital, you pay either the entire cost of the services or copays based on your policy’s guidelines. When the total amount you spend for services in a year, excluding copays, reaches your deductible amount, your insurance begins to cover a larger portion of your medical expenses, often 80 percent. Coinsurance refers to the remainder of your payment.

You’ll keep paying copays or coinsurance until your policy’s out-of-pocket maximum is reached. Until the policy year ends or you switch insurance policies, your insurer will begin paying 100% of your medical expenditures at that point.

Does coinsurance count toward the deductible?

No. After you’ve met your deductible, coinsurance is the portion of your healthcare costs that you pay. If you have a 20% coinsurance, for example, your insurance provider will pay for 80% of all expenditures after you’ve met your deductible.

What’s a health insurance premium?

A health insurance premium is a one-time expense of having health insurance. The majority of premiums are paid monthly or bimonthly. If your employer pays for your healthcare, the premium is normally deducted from your paycheck

What’s a high-deductible health plan?

A low-cost health insurance plan with a large deductible is known as a high-deductible health plan. These plans are popular among young, healthy workers with modest normal medical expenses who are concerned about catastrophic healthcare events because they may come with substantial out-of-pocket expenses.

The Health Savings Account, which is only available to employees with an HDHP, is another advantage of high-deductible plans. These savings accounts are tax-free if the funds are used for qualifying medical costs.

Is a co-pay the same as a deductible?

No, but the two terms are frequently mixed together. A co-pay is a cost you pay when you obtain healthcare services such as going to the doctor or picking up prescriptions. Your health insurance provider will cover a portion of the cost, and you will be responsible for the remainder. A deductible is a predetermined amount that you must pay before your health insurance company begins to pay for your treatment. After a deductible has been met, co-pays are usually levied. Co-pays, on the other hand, are usually applied right away.

Are copays and coinsurance tax-deductible?

If your healthcare costs, such as copays, coinsurance, and premiums, exceed 7.5 percent of your adjusted gross income, they may be tax-deductible. If your medical expenses surpass that level, you can deduct the excess of 7.5 percent.

Do all health insurance plans have copays and coinsurance?

No. Customers may not be required to pay a copay for medical treatments under certain healthcare plans, although these policies usually come with hefty premiums. A catastrophic health plan with a large deductible, on the other hand, may pay up to 100% of many preventive expenses without coinsurance.


When shopping for health insurance, the plan descriptions will always include the premiums (the monthly payment for the plan), deductibles, copays, coinsurance, and out-of-pocket restrictions. Premiums are generally higher for plans with more favorable cost-sharing advantages.

A low-cost plan with larger limits can work for you if you’re normally healthy and cautious. However, if you anticipate high healthcare costs, it may be worth it to pay a higher monthly premium to get a plan that covers more of your spending.

John Otero

John Otero

John Otero is an industry practitioner with more than 15 years of experience in the insurance industry. He has held various senior management roles both in the insurance companies and insurance brokers during this span of time. He began his insurance career in 2004 as an office assistant at an agency in her hometown of Duluth, MN. He got licensed as a producer while working at that agency and progressed to serve as an office manager. Working in the agency is how he fell in love with the industry. He saw firsthand the good that insurance consumers experienced by having the proper protection. John has diverse experience in corporate & consumer insurance services, across a range of vocations. His specialties include Major Corporate risk management and insurance programs, and Financial Lines He has been instrumental in making his firm as one of the leading organizations in the country in generating sustainable rapid growth of the company while maintaining service excellence to clients.

Insurance Noon is the world's leading source of insurance related content on the web, focusing on industry news, buying guides, reviews, and much more.