One of the questions we routinely get is about the differences between deductibles vs copays on health insurance plans. Both benefits will appear as a flat rate amount on your health plan’s summary of benefits, but they have vastly different meanings. Furthermore, the out of pocket costs are significantly different when comparing deductibles vs copays. This article discusses the basic definition differences between deductibles vs copays.

Deductibles

Insurance companies will impose deductible requirements on health insurance plans in certain situations. These deductibles are an accumulation of claims that you need to pay out of pocket first, before the insurance company starts covering the claim. Usually, insurance companies will split a percentage of the claim (ie. coinsurance) with you after the deductible is satisfied.  Sometimes, you will receive a copay benefit after your deductible is satisfied. We recommend checking your summary of benefits to verify your coverage.

Deductibles are a way for insurance companies to shift the cost of the claim onto you first. After the deductible, they will start paying part of the claim. Because of this, it is usually a good idea to avoid plans with deductible requirements. This will help reduce your out of pocket claim exposure.

Keep in mind – HSA compatible health plans are required to have high deductible requirements in all benefit categories. If you want to contribute pretax monies into a Health Savings Account, you cannot avoid these mandatory deductible requirements.

Deductibles are usually based on a plan year, not per incident. For example, most health insurance plans with deductibles will make you satisfy the deductible once during the year. Once you satisfy your deductible, it is usually satisfied for the rest of the year. Satisfying the deductible can occur in a single claim or over the course of the year with multiple claims. Be careful – not every claim accumulates towards your deductible. For example, copays do not accumulate towards your deductible, but they accumulate towards your maximum out of pocket.

Copays

Deductibles are confusing and can cost you a lot of money out of pocket. Fortunately, copays are easy and straight forward! Copays are a flat rate fee for a service. For example, if your plan has a $20 Primary Care Physician copay, you will pay $20 for the office visit and the insurance company will pay the rest. It is important to review your summary of benefits to make sure there are no deductible requirements before your copay benefit.

Copays are transparent. Since it is a flat rate fee and usually does not have deductible requirements, you will know the cost of your medical appointment before you walk in the doctor’s office. If you are receiving medical care under a copay benefit, the doctor’s office usually collects the copay at the time of your appointment. On the other hand, your doctor sends claims to your insurance company first for medical services subject to the deductible. You will then receive a bill in the mail a few weeks or months later.