Finding the right health insurance plan can be daunting. Unlike most other types of insurance, health insurance policies usually incorporate some form of cost sharing, meaning you will likely end up paying more than just the cost of your premium. In order to ensure that you have the proper form of coverage, it is imperative to understand two of the most frequently confused components of health insurance plans, copays and coinsurance.
A copay is a fixed fee that the patient is responsible for paying out of pocket at the time of care. These rates are fixed in your policy agreement and will not change with each visit. Keep in mind that different types of medical care may have different copays, so the amount you pay may be different for a checkup at your primary care physician than it is for an emergency room visit.
Coinsurance, on the other hand, is a charge calculated as a percentage of each individual medical bill. This portion of medical costs must be paid each time you use your health coverage up until you reach your out-of-pocket maximum for the year. Unlike fixed-dollar copays, coinsurance charges will be higher for more expensive procedures.
Copays and coinsurance are both entirely separate from plan deductibles. Deductibles are the annual payments a patient must make for their own coverage before the health insurer begins to pay the remainder of the bills. The funds put towards deductibles do not count towards copay and coinsurance obligations. For example, an insured person with a deductible of $500, a copay of $25, and coinsurance of 20% would be responsible for paying $525 before their insurance kicked in, as well as 20% of the rest of the procedure’s cost. Keep in mind that all of this is in addition to monthly premium expenses.
So, what’s the best way to pick a plan? Generally speaking, different coverage options will have a trade-off between premium costs and cost sharing burdens. If you are a relatively healthy young person and do not plan on receiving much medical attention, you may want to go with a low premium, high coinsurance plan. If you are getting older or are in poorer health, it may be worth paying a higher premium to avoid larger coinsurance costs that could add up with multiple doctor visits. Either way, make sure you are taking into account all aspects of your prospective coverage.