Insurance Deductibles, Coinsurance, and Copay: What’s the Difference?
When shopping for health insurance, it’s important to understand what factors will impact your costs. Deductibles, coinsurance, and copays will affect how much your out-of-pocket expenses are. But understanding the differences between these terms can be confusing, and as such, many individuals don’t fully understand what their financial obligations are when receiving medical care. To help you find the right insurance policy for your needs, here’s a closer look at the differences between deductibles, coinsurance, and copays.
KSA Insurance helps individuals and businesses in South Carolina and across the southeastern United States find affordable, comprehensive health insurance policies that meet their needs. Request a quote today.
What is a Deductible?
Your deductible is the amount you have to pay out-of-pocket for medical services before your insurance benefits cover anything.
For example, if your yearly deductible is $2,500, you will have to pay the first $2,500 of healthcare costs before your benefits kick in. Not all services are subject to deductibles, though. Many health insurance plans cover basic preventative services like physicals and immunizations before you hit your deductible.
High deductible plans typically have lower premiums, making them more suitable for policyholders that don’t need to receive medical care frequently. However, if you do require constant medical care, a lower deductible plan with a higher monthly premium may be a more cost-effective option.
What is a Copay?
Many health insurance plans have deductibles and copays. A copay is the fixed out-of-pocket amount you must pay for covered medical services regardless of whether or not you have met your deductible. While many health plans cover preventative care without you having to meet your deductible, you’ll still have to pay your copay when receiving these services.
Copays often vary depending on the specific service you receive. For example, you may have a $50 copay for a routine doctor’s visit and a $20 copay for medication. If your plan does require a copay, you’ll have to pay the specified amount at the time of service.
Copays typically don’t contribute to your deductible. However, be sure to review your insurance policy, as some plans do count this cost towards your deductible.
What is Coinsurance?
After you meet your deductible, you may still be required to pay for a percentage of covered medical services. This is known as coinsurance. If your coinsurance rate is 20%, this means that you’ll have to pay 20% of the cost of covered medical expenses after hitting your deductible, and your insurance policy will cover the remaining 80%.
For example, if your coinsurance is 20% and you receive medical services that cost $1,000, your out-of-pocket expenses will total $200.
Understanding Your Out-of-Pocket Maximum
Your out-of-pocket maximum is the most you have to pay for covered medical services during a single year. After hitting your out-of-pocket maximum, your insurance policy will cover all covered medical expenses regardless of your deductible, copay, or coinsurance rate. However, you will still have to pay out-of-pocket for medical services that are not covered by your insurance policy.
For example, your insurance policy has a $2,000 deductible, a 20% coinsurance rate, and an out-of-pocket maximum of $8,000. If you had to have an emergency surgery that costs $100,000, you would pay the first $2,000, then you would pay for 20% of the remaining bill until you hit your out-of-pocket maximum of $8,000. At this point, your insurance policy would cover the remaining cost of the surgery and all other covered medical expenses for the remainder of the year.
Reducing Your Out-of-Pocket Costs
Depending on your insurance policy, your out-of-pocket expenses can be quite high. If you’re looking for a way to reduce these expenses, there are a few tips to keep in mind:
- A health savings account (HSA) can help you prepare for future medical expenses by allowing you to set aside pre-tax income to pay for eligible medical expenses.
- When possible, seek medical care in your insurance policy’s network to reduce your total healthcare costs.
- Use telemedicine services for routine healthcare needs when possible.
- Consider searching for health discount plans to save money on certain types of medical care.
Healthcare can be very costly, but there are several ways you can reduce your out-of-pocket expenses.
Request a Quote
By taking the time to learn about how deductibles, copays, and coinsurance impact your out-of-pocket expenses, you can find a plan that allows you to get the care you need at a reasonable rate.
At KSA Insurance, we help individuals and businesses in South Carolina and across the southeastern United States find affordable, comprehensive health insurance policies that meet their needs.
Contact us today to learn more about your health insurance options and get a custom quote.