Differences between copayment and health coinsurance

What is the difference between copayment and coinsurance? Both copayment and coinsurance help health insurance companies save money (and therefore keep your premiums lower) by making you responsible for part of your health care bills. Both are forms of cost-sharing, which means that you pay part of the cost of your care, and the health insurance company pays part of the cost of your care. The difference between copayment and coinsurance is in:

• How your share of the cost is shared between you and your health insurance company, including how often you have to pay.
• The amount of financial risk to which each one exposes it.

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How a copay works

A copayment is a fixed amount that you pay each time you use a particular type of health care service. For example, you might have a $ 40 copay to see a  primary care doctor and a $ 20 copay to fill a prescription. As long as you stay in-network and meet your plan’s prior authorization requirements, pay the copayment amount, your health insurance company will pay the rest of the bill, and that’s it. Your copayment for that particular service does not change no matter how much the doctor charges, or how much the prescription costs (although more expensive drugs tend to be at higher copay tiers, and more expensive drugs often have coinsurance in place. one minute).

Unlike a  deductible that is only paid once a year (or once per benefit period, if you are enrolled in Medicare), you pay the copayment each time you use that type of health care service.

Example

If you have a $ 40 copayment for doctor’s office visits and you see the doctor three times for your sprained ankle, you will have to pay $ 40 for each visit, for a total of $ 120.

How Coinsurance Works

With coinsurance, you pay a percentage of the cost of a health care service, usually, after you’ve met your deductible, and you only have to continue paying coinsurance until you’ve reached your plan’s out-of-pocket maximum for the year. Your health insurance company pays the rest of the cost. For example, if you have a 20 percent coinsurance for a hospital stay, this means that you pay 20 percent of the cost of the hospital stay, and your health insurer pays the other 80 percent.

Because health insurance companies negotiate discounted rates from their in-network providers, you pay coinsurance on the discounted rate. For example, if you need an MRI, the MRI facility may have a standard rate of $ 600. But, since your health insurance company has negotiated a discount rate of $ 300, your coinsurance cost would be 20 percent. of the discount rate of $ 300, or $ 60.

Charging coinsurance at the full rate instead of the discounted rate is a common billing mistake that will cost you more than it should pay. If your plan uses coinsurance, you’ll want to make sure the bill is first sent to your health insurance company for any applicable adjustments, and then you will be billed for your share (rather than paying your percentage upfront at that time). of service). How to calculate coinsurance for your health plan

Pros and Cons of Copayment vs. Coinsurance

The advantage of a copayment is that there is no surprise about how much a service will cost you. If your copay is $ 40 to see the doctor. You know exactly how much you will have to pay even before you make the appointment. On the other hand, if the service costs less than the copayment. You still have to pay the full copayment (this can happen in the case of generic prescriptions, which can have a retail cost as low as your health plan’s copayment). for Level 1). drugs may be higher than the retail cost of drugs). If you’re seeing the doctor often or filling a lot of prescriptions, copayments can add up quickly.

Coinsurance is riskier for you as you will not know exactly. How much you will owe until the service is performed.

For example, you can get an estimate of $ 6000 for your next surgery. Since you have a 20 percent coinsurance, your share of the cost must be $ 1,200. But what if the surgeon finds an unexpected problem during surgery and has to fix it too? Your surgery bill could reach $ 10,000 instead of the original estimate of $ 6,000. Since your coinsurance is 20 percent of the cost. You now owe $ 2,000 instead of the $ 1,200 you had planned. Will limit the amount you must pay in a given year, so it is not an unlimited risk).

Insurance companies like coinsurance because they know that you will have to bear more of the cost of expensive care. Under a coinsurance agreement then if you had to pay a simple copayment. They hope it will motivate you to make sure you need that expensive test. Or procedure, as your share of the cost, can be a lot of money. Even if it’s only 20% or 30% of the bill.