What is a Health Insurance Copay?
In health insurance a copay (copayment) is a fixed amount you pay for covered services, typically when you get the service. Copays differ from coinsurance (the percentage you pay for covered services, usually after reaching your deductible). Each plan treats copays and coinsurance differently, so it’s important to understand if your plan offers copays, what services they offer them for, and how many of one service you can get at that copay per policy period.Copayments usually only comprise a fraction of the actual cost of a service (for example the service is $100 and your copayment is $10). This helps to ensure that people seek medical attention or get drugs when they need it (they don’t put off treatment due to cost, and don’t overuse services due to the comparatively small price-tag).
How do Copayments Work?
On your plan certain covered services will have a copayment amount. This is the amount you pay when you get that service, your insurer picks up the difference between the actual cost and your copayment amount. Sometimes you’ll have a limit on the number of times you can get that service at that copayment, once you reach your limit your coinsurance may apply or you may have to pay the full rate out-of-pocket or that service may simply be subject to a higher copay or coinsurance after dedcutible.
Under the ACA some essential benefits like vaccinations and an annual wellness visit are included without cost sharing, including copayments. If you go in for more than the allowed amount of some of these services you could be subject to cost sharing at that point.
Copayments and Subsidies
Copayments can be lowered by applying for Cost Sharing Reduction (CSR) subsidies on the marketplace. Only Silver plans are eligible for CSR subsidies.
When Cost Sharing Reduction subsidies are applied to your plan they won’t lower your copays by a specific amount, instead they will lower all of your out-of-pocket costs to fall in line with a higher actuarial value. Actuarial value is the average percentage of out-of-pocket costs a plan will pay for all persons on that plan.
Income Level Actuarial Value (the amount of costs a Silver plan will cover due to cost sharing reduction subsidies for % of the Poverty Level).
100-150% FPL = 94% Actuarial Value
150-200% FPL = 87% Actuarial Value
200-250% FPL = 73% Actuarial Value
The Importance of Copays
Most people’s medical expenses will be doctor office visits, therapists, and prescriptions. These services are typically paid for with either copays or coinsurance, depending on your plan. That being said it is common for plans cover all these with copayments. For a family, these services could easily run to $5,000 or more a year before insurance. This could mean a big difference between plans that have $10 copays and those with $40 copays. Given this it is often a smart move to make sure that the plan you choose covers the medical services you know you’ll need often with a generous copay.
Copayments: Deductibles and Out-of-pocket Maximums
As a rule of thumb, what you pay toward your plan’s deductible, coinsurance, and copayments are all applied to your out-of-pocket maximum.
Specifically, the amount you pay in a copay always counts toward your maximum for services that are considered essential health services under the ACA.
With that said, on most plans copayments don’t count toward your deductible.
Make sure to check your benefit sheet to see what copayments will go toward your maximum or if any copayments may go toward your deductible.
Copayments and Benefits
Knowing how much your copay is is important, but knowing what benefits and drugs it covers is almost more important. Make sure the services you need and the drugs you take are covered under your plan at a copay that makes sense for you. If a copay is applied to your in-network deductible or maximum, it’s going to help you reach your annual deductible or maximum faster.
Copayments and Networks
If you use covered in-network services subject to a copay you’ll only pay that fixed amount and the amount you pay in some cases goes towards your maximum (see details above). If you shop out-of-network your plan may have different rules for the amounts it will pay, if any.
Out-of-network copays and balance billing won’t count toward your deductible or in-network out-of-pocket maximum.
Copayments and Coinsurance
Typically covered services will either be subject to a copayment or coinsurance. Copays cover you before the deductible by a fixed amount, typically before your deductible, and coinsurance covers you after for a fixed percentage, typically after your deductible. If you have a high deductible plan you’ll want to focus much more on copays than coinsurance amounts since all covered costs are paid by the insurer once you reach your out-of-pocket maximum.
Copayments on Prescription Drugs
One of the most common copayments is on prescription drugs. You’ll need to check your plans drug formulary to make sure you drugs are covered. Then check the benefits sheet to see copayment amounts for each tier of drugs. Generics may be covered at different levels as brand names. If you have a drug that isn’t covered under a plan you can try looking for a free drug copay card.