- Co-pays and deductibles are both features of most insurance plans.
- A deductible is an amount that must be paid for covered healthcare services before insurance begins paying.
- Co-pays are typically charged after a deductible has already been met. In some cases, though, co-pays are applied immediately.
What Are Co-pays?
A co-pay, short for co-payment, is a fixed amount that a healthcare beneficiary pays for covered medical services. The remaining balance is covered by the person’s insurance company.
Co-pays typically vary for different services within the same plans, particularly when they involve services that are considered essential or routine and others that are considered less routine or in the domain of a specialist.
Co-pays are typically lower for standard doctor visits than for seeing specialists. Co-pays for emergency room visits tend to be the highest.
What Are Deductibles?
A deductible is a fixed amount that a patient must pay each year before their health insurance benefits begin to cover the costs.
After meeting a deductible, beneficiaries typically pay co-insurance—a certain percentage of costs—for any services covered by the plan. They continue to pay the co-insurance until they meet their out-of-pocket maximum for the year.
Some plans have a separate deductible for prescription drugs or other services. With family plans, there are often two deductibles: for an individual, and for the whole family.
In most cases, preventive services are covered at 100%—meaning that the patient doesn’t owe anything for the appointment. Plans offered through the Patient Protection and Affordable Care Act pay in full for routine checkups and other screenings considered preventive, such as mammograms and colonoscopies for people over a certain age.
Suppose a patient has a health insurance plan with a $30 co-pay to visit a primary care physician, a $50 co-pay to see a specialist, and a $10 co-pay for generic drugs.
The patient pays these fixed amounts for those services regardless of what the services actually cost. The insurance company pays the remaining balance (the “covered amount”). Therefore, if a visit to the patient’s endocrinologist (a specialist) costs $250, the patient pays $50 and the insurance company pays $200.
Now suppose the same patient has a $2,000 annual deductible before insurance starts to pay, and 20% co-insurance after that.
In March, he sprains his ankle playing basketball, and treatment costs $300. He pays the full cost because he has yet to meet his deductible. In May, he has back problems, which cost $500 to treat. Again, he pays the full cost.
In August, he breaks his arm playing touch football, and the bill for his hospital visit comes to $3,500. On this bill, the patient pays $1,200—the balance of his deductible. Once he meets the deductible, he also pays 20% (his co-insurance amount). In this case, that would be an additional $460 (20% of $2,300—the difference between the deductible and the hospital visit).
Is a Co-pay the Same as a Deductible?
No, but the two terms are often confused.
A co-pay is a fee that you pay when you receive healthcare services, such as visiting a doctor or picking up prescriptions. Your health insurance company will pay part of this cost, and you will pay the rest. A deductible is a set amount that you must meet for healthcare benefits before your health insurance company starts to pay for your care. Co-pays are typically charged after a deductible has already been met. In most cases, though, co-pays are applied immediately.
What Is an Average Deductible?
This will depend on your personal circumstances, but a high-deductible plan is generally regarded as any plan that has a deductible of $1,400 or more for an individual or $2,800 or more for family coverage. Plans with lower deductibles will have higher monthly premium costs.
Though high-deductible plans usually cost you more in out-of-pocket expenses, they can have advantages that offset that cost. Generally, high-deductible plans qualify for a Health Savings Account (HSA), which can help you to save for and manage healthcare costs.
What Does 100% After Deductible Mean?
You might see this phrase on the paperwork relating to your health insurance, and it can be confusing. This means that you will not have to pay a co-pay after you reach your deductible, because after that point, your insurance company will pay for all of your healthcare costs.
The Bottom Line
Co-pays and deductibles are two parts of the health insurance equation. In general, plans that charge lower monthly premiums have higher co-payments and higher deductibles. Plans that charge higher monthly premiums have lower co-payments and lower deductibles.
When choosing a plan, consider whether you expect to have a lot of medical bills. If so, then it may make financial sense to buy a more expensive plan with lower co-pays and a lower deductible. And, of course, keep an eye on the maximum out-of-pocket limits as well.