Difference Between Copay and Coinsurance

Copay vs Coinsurance
 

Health or medical insurance is an insurance coverage that is purchased for the purpose of providing protection and coverage against health related risks. Medical insurance is unique insurance cover with its own terminology and unique structure. Medical insurance does not cover 100% of the cost, and the portion of the cost that the medical insurance does not cover is an out-of-pocket expense for the client. There are three types of out-of-pocket expenses including copay, coinsurance and deductibles. The following article explores two of these medical insurance terms, namely copay and coinsurance and explains their similarities and differences.

What is Copay?

Copay is the amount that the patient has to pay directly to the doctor, hospital or healthcare provider for every visit. Copay also applies to medication purchased from pharmacies and is charged for every prescription. Copay passes on a part of the responsibility of paying for the medical bill to the patient and ensures that the patient does not visit the doctor unnecessarily. Patients are generally charged between $15 and $50 as a copay for every visit that they make to a healthcare provider. However, the amount that is charged as copay depends on a number of factors. For visits to specialists the copay  is generally higher than for general physicians. Purchasing generic drugs vs branded drugs lowers the copay. Furthermore, contracts that insurance companies have with healthcare providers also affects the copay. For health care providers in the insurance company’s network the copay is lower. Copay has to be made only until the maximum out-of-pocket limit is met.

What is Coinsurance?

Coinsurance is a mechanism under which the patient shares the health care cost with the insurance company. For example, if the cost sharing ratio is 70/30, then the insurance company covers 70% of the total health care cost for the year and 30% is be covered by the patient. However , in most instances once the medical cost reaches the patient’s total out-of-pocket maximum the cost sharing between the parties stops. If the patient’s total annual medical bill exceeds the out-of-pocket limit per year, the insurance company covers the rest of the medical expenses for that year. Coinsurance is generally higher if the healthcare provider is not in the insurance company’s network of providers .

What is the difference between Copay and Coinsurance?

Medical insurance generally does not cover a 100% of the total medical bills. There are a number of payments that need to be made out of the pocket of the patient, including copay and coinsurance payments. Both are methods used by insurance firms to share the medical costs with patients. As with copayment the amount that needs to be paid for each visit to a health care provider, or each prescription filled is set. There are no surprises to the patient as the same amount is paid in each instance. However, coinsurance payments are not set amounts (as they are charged as a percentage) and varies depending on the cost of the procedure or costs of additional issues and complications. An insurance company  rarely uses both copay and coinsurance. However, an insurance company prefers to charge a coinsurance as it transfers more of the risk and responsibility of payment to the patient.Usually both copay and coinsurance payments ends once the patient’s out-of-pocket limit is met. However, this may not always be the case.

Summary

Copay vs Coinsurance

• Medical insurance generally does not cover 100% of the cost, and the portion of the cost that the medical insurance does not cover is an out-of-pocket expense for the client.

• There are two types of out-of-pocket expenses including copay and coinsurance.

• Copay is the amount that the patient will have to pay directly to the doctor, hospital or healthcare provider for every visit. Copayment also applies to medication purchased from pharmacies and is charged for every prescription.

• Coinsurance is a mechanism under which the patient shares the health care cost with the insurance company. For example, if the cost sharing ratio is 70/30, then the insurance company covers 70% of the total health care cost for the year and 30% is covered by the patient.

• Copay is a set amount, whereas coinsurance payments are charged as a percentage and varies depending on the cost of the procedure or costs of additional issues and complications.

 

Further Reading:

1. Difference Between Deductible and Out of Pocket Maximum 

2. Difference Between Copay and Deductible