With a new administration in the White House there are always going to be some changes in healthcare policy, so it’s a good idea to revisit the basics. Regardless of the type of healthcare plan you may have, some of the services will require a co-pay. Deductibles and coinsurance are also common forms of payment, but each varies in definition, and each plan has different offerings. Here is a closer look at exactly what each means.
Deductibles are put into place in health insurance policies to require users of a given policy to have to pay a certain amount on top of their premiums every year if they choose to get any sort of services done. On the side of the insurance company, these deductibles exist so people don’t just decide to get a service done at the end of the year simply because they haven’t used their insurance yet.
For instance, a person’s annual deductible may be $1,000, meaning that the first $1,000 of care that individual receives each year will be coming out of their pocket. After that deductible threshold is met, insurance actually kicks in to cover additional expenses. Many of these expenses have what are referred to as co-pays or co-payments, meaning the insurance company still doesn’t cover every penny spent after the deductible has been paid.
In the simplest terms, a co-payment is a fixed amount that you pay for a given health care service after you’ve paid your plan’s deductible in a given calendar year. Co-pays vary from service to service. As an example, one type of psychology treatment may have a $20 co-pay, while another may have a $100 co-pay, in which case the individual would pay that amount for each service after the deductible has been eclipsed.
What a co-pay is not is the total price of a given service, and insurance companies also have limits on what they will cover for those services. For example, a policy may be written that says a given procedure will be covered up to $400, with a $30 co-pay. If you were to find a doctor who performed the procedure for $500, you would have to pay the $30 co-pay plus the $100 over the coverage offered for that procedure through your insurance. With that, be wary of limits on procedures, as the co-pay doesn’t necessarily cover every available option for a given procedure, drug, etc.
Similar to co-pays, coinsurance is an out-of-pocket expense for policyholders. The major difference (and again, there are many caveats from policy to policy) is that a coinsurance is a percentage where a co-pay is a fixed amount. In the scenario above, an insurance company may cover that procedure from anyone and everyone with a 30% coinsurance, meaning the policyholder would pay 30% of whatever the bill would be. In the $500 procedure scenario above, the policyholder would pay $150, and the insurance company would pay $350.
Most policies have coinsurances and co-pays, depending on a given procedure, drug, service, hospital stay, etc. It is important to weigh your health habits with these things, as emergency services, for instance, can still be astronomical with a coinsurance, where if there is a co-pay, you know exactly what you can expect to pay if you wind up in a situation requiring emergency care.
If you’re someone who plans on using a given service frequently, it’s important to do some shopping on your own to see if the service would be cheaper to pay a percentage of, or a fixed amount (i.e. coinsurance versus co-pay).