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Key takeaways
Copayments, or copays and deductibles, are both forms of cost-sharing with the health insurance company.
A copay is a fixed rate that must be paid upfront for a doctor’s visit. A deductible is a fixed annual amount that has to be paid before the health plan begins to pay.
Copays may or may not count toward the deductible. It depends on the health plan.
Plans with lower monthly premiums typically have higher copays and deductibles. In contrast, plans with higher monthly premiums usually have lower copays and deductibles.
When selecting a plan, consider how often you expect to use health care services. If you expect to have many medical expenses, a more expensive plan with lower copays and deductibles may be more suitable.
When using health insurance for medical services, the health plan enrollee must pay a portion of the cost. This is known as “cost-sharing,” which is how health insurance companies split the cost of care with the enrollee.
The copayment, or copay, is a fixed amount that needs to be paid at each doctor’s visit. Most plans also have a deductible, a fixed amount one must pay before the insurance plan starts covering any health care expenses. Copayments may or may not count toward the deductible; it depends on the specific plan.
Do copays count toward your health insurance deductible?
The amount the health insurance policyholder has to pay varies based on the service provided and the details of their particular plan.
Copays and deductibles differ in how much has to be paid, when they have to be paid, and what’s remaining for the plan to pay after using health services. While copays and deductibles are both fixed amounts, meaning they do not change based on the cost of the health service, copay amounts are usually much smaller than those of deductibles. A copayment paid in an instance where a plan utilizes both a copay and deductible simultaneously (rare) often counts toward the deductible, but it’s not always the case. For example, the plan may not include drug spending toward the deductible.
“Plan enrollees typically have to pay either a copay, coinsurance, deductible, or some combination of all those things,” said Matthew Rae, associate director of the Program on the Health Care Marketplace at KFF. They all come with their own limits. You could have a copay up to a dollar amount and then a coinsurance after that, depending on how your plan is structured.”
While copays are fixed dollar amounts (e.g., $25 copay for a primary care physician and $50 copay for a specialist), coinsurance is generally a percentage of the negotiated rate between the provider and the insurer, according to Paul Shafer, PhD, an assistant professor of Health Law, Policy, and Management at Boston University.
Shafer gave the example of a doctor’s office visit that cost $200.
“If you had a $50 copay, then you would just be responsible for $50 for that visit, whereas if you had 30% coinsurance, you would be responsible for 30% of the $200 visit, which would be $60,” he said. The remaining $140 would be covered by the insurance provider.
For most plans with copays, primary care visits are cheaper than specialist visits. The copay for the specialist may be double the cost. Inpatient care, such as days in the hospital and complex surgery, is often (but not always) done on a coinsurance basis rather than copayments.
“Different plans do different things,” Shafer said. “Most plans have a combination of copays for office visits and specialist visits with coinsurance for other services, like hospital care, but it varies.”
Even after the deductible is met, copays and coinsurances will typically continue. Only when the out-of-pocket maximum amount is met do the copays stop. Preventive services, such as screenings and immunizations, do not typically impose cost-sharing. The Affordable Care Act (ACA) requires most private health insurance plans to cover preventive healthcare services at no cost to patients.
Common misconceptions about copays and deductibles
A common misconception about deductibles is that all medical care used counts toward them. In many cases, care received that the plan does not cover will not count toward the deductible. A common misconception with copays is that all prescription drugs will be covered with the same copay. Name-brand medications are usually more costly than generic drugs, meaning the enrollee is charged more or may not be covered.
Understanding all the detailed information in a complicated plan is challenging. Many people need help understanding the meaning behind all the different services and terms, such as copays, deductibles, and coinsurances. The interplay between all these components further complicates matters.
Fifty-one percent of adults with health insurance reported that they find at least one aspect of how their insurance works somewhat difficult to understand, according to the KFF Survey of Consumer Experiences with Health Insurance. A quarter of adults surveyed said they have difficulty understanding terms like “deductible” and “coinsurance.” Thirty percent said it was difficult to decipher what they would owe in out-of-pocket costs when receiving health services.
“The terminology across the country and across plans is not always universal, which makes it difficult,” Rae said. “The structure of these cost-sharing arrangements is just so complicated.”
Rae said people may have a lower copay with certain providers, and the copays may have conditions around them. When an enrollee shows up at a doctor’s office, it’s not always clear what copays they will face, and it may be multiple copays if they see more than one provider. For an inpatient hospital stay, there are sometimes facility fees that are a part of the overall cost, which can get very confusing, Rae said.
“Before the healthcare claim is processed through the insurer, you see this big number about the cost of service,” Rae said. But it’s not always clear what you’re going to be on the hook for.”
According to Rae, the question is not what is confusing about copays, coinsurance, and the world of insurance, but what isn’t. “It takes a lot of work to navigate your plan,” he said.
The financial interplay between deductibles and premiums
When choosing a health insurance plan, consider the short-term and long-term financial implications. A key consideration should be how much healthcare one expects to use.
Young and healthy people often opt for a high-deductible plan that’s cheaper because it carries low premiums. They don’t expect to use much care, but they’ll be protected in case a medical emergency happens.
An accident that results in hospitalization or emergency room visit could “easily wipe out the vast majority of Americans financially” if they’re not insured, Shafer said.
“Having coverage is very important, but if you’re young and healthy, you may not need the more generous plan with lower deductibles,” Shafer said.
On the other hand, those who anticipate using health care regularly, including older adults, people with children, and those with chronic conditions, are more likely to have more health spending. They may want to consider a plan with lower deductibles and a higher premium.
Shafer said paying more in premiums and having lower deductibles can provide predictability and help manage costs better throughout the year.
“There’s always a trade-off,” he said. “Nothing comes for free. You’re either paying less and having more potential exposure to costs when you need care versus paying a bit more and having a little more protection from the costs when you actually use it.”
What do your copays count toward?
Most health plans have an out-of-pocket maximum, which is the maximum amount of money that an enrollee can spend on medical care in a given year.
“That would be the sum of your copays, coinsurance, and deductibles in a year,” Rae said. “A typical amount would be between $6,000 and $7,000.”
Copays, deductibles, and coinsurances typically all count toward the out-of-pocket maximum. An enrollee can see healthcare providers or facilities from a provider network, considered “in-network” and only for covered services. As a general rule, once the out-of-pocket maximum is met, the enrollee will not have any additional costs, whether copays or coinsurance, for the rest of the plan year.
The caveat is that if an enrollee has satisfied the in-network out-of-pocket maximum but then goes to a provider or hospital out-of-network, they’ll still probably have to pay more. Some people have to have medical equipment not covered by their plan or see a specialist not in their network.
Shafer said the out-of-network limit on out-of-pocket expenses is usually double that for in-network providers.
For example, he said that if an enrollee has an in-network deductible of $2,500 and an out-of-pocket max of $5,000, the out-of-network limits are probably $5,000 and $10,000.
“You could have satisfied the in-network deductible of $5,000 but still be on the hook for several thousand more potentially if you did go out of network,” Shafer said.
Understanding whether copays count toward your deductible is essential for managing healthcare costs. While copays typically don’t contribute to the deductible (because most people still paying a deductible typically won’t have copays), reviewing your specific insurance plan is crucial to confirm. By understanding these terms, you can better anticipate healthcare expenses and make informed decisions about your coverage.