Employee Benefits
What Is an Insurance Copay?
An insurance copay (or copayment) is a set amount you pay out of pocket for certain covered services or prescriptions when you receive the service. Many health, vision, and dental insurance plans have copays.
This copay definition may seem simple, but there are nuances in how copays are determined and how they work. Let’s explore some of their ins and outs.
How do copays work?
As previously noted, copayment fees are a fixed amount of money — not a percentage of your total bill. Copayment amounts vary by insurer and insurance plan. A policy with a lower insurance premium (that’s your monthly cost for your insurance plan) may have a higher copay for certain services, and vice versa.1 You can usually find your copay options in the terms of the plan you’re considering. You can also check your insurance card to see if there’s a copay and how much it is.
What services often require copays?
You may come across copays when you:
- Purchase prescription drugs at the pharmacy
- See a specialist physician
- Go to the emergency room
- Visit the dentist
- Get an eye exam
What services may not require copays?
Some insurance plans waive copays for preventative care which may include vaccinations, annual checkups or physicals, mammograms, and other preventative screenings. You also may avoid copays for office visits and prescriptions if you have a high-deductible health plan (HDHP).2
How are copays determined?
Keep in mind that the copay will often differ for different services. For example, what you pay for a visit to the emergency room probably won’t be the same as the copay for a planned appointment or a visit to a specialist.
Prescription copays
When you purchase a prescription from the pharmacy, your copay amount may differ from your appointment copay. That’s because prescriptions fall into different drug price tiers depending on your insurance policy. These tiers determine your copay. You may also come across changes in your copay amount depending on whether you purchase your prescription from an in-store pharmacy or a mail-order/online pharmacy.
In-network vs. out-of-network copays
Your copay may change between in-network and out-of-network providers, too. According to the Kaiser Family Foundation, with the exception of emergency care, insurance companies aren’t required to provide coverage for out-of-network providers, though some do. You may find that your copay and overall rates for visiting out-of-network providers are higher than in-network providers — or not covered at all. This depends on the provider and plan, so it’s best to consult your insurance company to find out if they cover your desired provider.3
Is a copay the same as coinsurance?
Coinsurance is another type of out-of-pocket payment. Unlike copayments, coinsurance is calculated as a percentage of the total cost of the service. Depending on the provider and service you’re receiving, you may have to pay both a copay and coinsurance fee. For example, a 10% coinsurance fee on a $300 medical bill will be $30. If you’ve already met your deductible, you’ll pay the $30, plus your copay. Speaking of deductibles..
Do copays count toward deductibles?
No, copay fees usually won’t count toward hitting your deductible. Of course, this can vary between insurance plans. Review your plan’s terms to make sure you know how much you’ll need to pay and when.
Also, you might not need to pay a copay until you hit your deductible. So, when you’re checking plan terms, note when copays come into effect.
Copay vs. out-of-pocket maximum
Your out-of-pocket maximum is the most you’re required to pay for services covered under your insurance plan in a year. Out-of-pocket maximums for Marketplace plans have a set limit, which group insurance plans typically adhere to as well.3
Most insurance plans count copayments toward your out-of-pocket maximum. So, when you make a copayment, you’re getting that much closer to 100% insurance coverage. However, premiums and out-of-network care typically don’t count toward your maximum.
Other ways to cover copay costs
Keep in mind that if your out-of-pocket costs seem a little too steep, you may want to consider these additional options:
- Use your HSA: You can use your health savings account (HSA) to pay for your copays and other out-of-pocket expenses. HSAs roll over yearly, so any money you saved last year may be able to be applicable toward your copays in future years.4
- Use your FSA: You can also use flexible spending accounts (FSAs) toward your copays and other out-of-pocket expenses.5
Know what copays to expect with your plan
If you’re preparing for open enrollment, be sure to carefully review plan terms to understand associated costs. Your human resources specialist or insurance agent can help guide you through the process of finding the right plan for you.