Health insurance has a lot of confusing terms and jargon. Many people ask us what the difference is between copays vs coinsurance. These names may sound similar but they are very different in definition. Also, the prerequisite requirements for these benefits can vary from plan to plan. This article discusses the basic definition between copays vs coinsurance. We recommend reviewing the summary of benefits on your plan to confirm the rules and definitions on your plan. When reviewing claims, please review your Explanation of Benefits (“EOB”) to make sure the charges are accurate. EOB’s are generated by the insurance company after each claim whereas bills are generated by the medical provider you visited.
Copays are a flat rate fee for a service. Usually, copays are available on day 1 of the policy and do not require you to satisfy a deductible. Some plans will require you to satisfy your deductible first before receiving a copay benefit. Copays are great because you know exactly what the cost will be for a specific medical service before the treatment occurs. For example, if you have a $20 doctor visit copay, the doctor’s office will charge you $20 for the visit. Your insurance plan will cover the rest of the cost of a routine doctor visit!
In the example listed above, there may be additional copays for additional services. In this example, the $20 copay covers standard physician fees. If you have an outpatient surgery during the same visit, you will be billed for the surgery as a separate line item charge.
Copays are transparent and allow you to plan ahead for medical costs. This will allow you to budget and know exactly what to expect on the bill from the provider. Usually providers want you to pay your copay at the time of service. If you do not have money readily available during your medical appointment, make sure to ask the provider to send you a bill in the mail.
One of the big differences between copays vs coinsurance is that coinsurance is not a flat rate fee. Coinsurance is always a percentage and usually comes in the format of 90/10, 80/20, 70/30, 60/40, o 50/50. Also, coinsurance usually requires you to satisfy your deductible first. If you have 80/20 coinsurance on your plan, the insurance company will pay 80% of the claim and you will pay the remaining 20% of the claim.
Unfortunately, there is no transparency with out of pocket claims subject to coinsurance. Unlike a copay benefit, you will need to wait for the bill to arrive in the mail before you know how much you owe. This is because the insurance claim needs to be processed first by the insurance company before you are billed by the provider. Because of this, you will never be billed for coinsurance at the time of your medical appointment. You will need to wait a few weeks or few months until the claim is fully processed by your insurance plan.