What to know about Coinsurance vs Copay to be informed.
Looking through the benefits statement of some health care plans can be daunting, especially if you are looking at them for the first time. A question that I often come by, whether it is a new prospective employer that hasn’t dealt with health insurance plans yet, or someone I met at beach on the weekends is, “What is the difference between Coinsurance and Copays? Is one better than the other? How do they work?” Luckily, the answer to the question is really quite simple, and I will explain below.
To be extremely brief, a copay is the exact amount of money you pay for a service, such as $20 to visit your primary care physician (also known as PCP, insurance jargon at its finest). So, if your plan states that you have a $20 copay to see your PCP, and you visit them, then you are going to be paying $20 out of pocket. A quick tip is to look for other factors on your benefits sheet to make sure you aren’t exceeding any maximum visits/days allowed per calendar year so you can dodge any penalties if your plan has them instated (it is prudent to always read the small print on any health plan).
Coinsurance is a little less black and white; in fact, it is a whole lot of gray. Coinsurance is essentially a payment that is a percentage of the coverage’s cost, so lets say you go visit the doctor for that rash you have, and the entire visit cost $100. If your copayment were 30%, then you would be paying $30 for the service. A simple calculation brings you to $30:
(PCP Visit) 100*(Coinsurance) 30% = (Out of Pocket Costs) $30
You may be looking at this and saying; “Well, they are basically the same in cost, I mean really, the coinsurance is only $10 more.” That is exactly right, however, when more serious services are used, the coinsurance has the chance of escalating due to its percentage, while your copayment, which will be a black and white fixed cost of $X, will always be the same (for each specific service). Here is another example. John Doe has outpatient surgery with a copay of $250. So, John Doe has paid $250 for the service he had, even if the surgery cost the insurance carrier a lot more. Dale Doe, John Doe’s brother, goes to the hospital for an inpatient service with a coinsurance of 30%, and unfortunately for Dale, the overall cost of the service was $5000. Dale is now out and about and as healthy as a mule, however, he has to pay $1500 for his inpatient service. Ouch!
So, coinsurance and copays definitely are different, and perhaps coinsurance looks a tad more expensive or variable than copays, which it generally is, but the benefits of coinsurance is that they are generally found in PPOs (preferred provider organizations) which give the member (whomever is insured) certain benefits over the copay members, which are generally under HMO (Health Maintenance Organization) plans. The differences between those two? Well, that is a whole other beast to deal with, and I will schedule to write a blog about that soon!
Broker Tip – If you are seeking a provider and are not on the verge of death and have a PPO plan, seeking providers and services within your network will save you a lot of time and money!
Additional Disclaimer – Although I am an Insurance broker and a professional in the field, the Health Care laws are ever changing, especially in the age of the Affordable Health Care Act, and the laws, information, opinions, or understandings that I have wrote about may be obsolete by the time you come across them and I take no legal responsibility for what actions you may or may not take because of it. To keep yourself safe, please seek updated professional advice, because changes are happening and I would like to keep everyone safe from any misleading or dead information. Please check out the “Terms and Conditions” page for more information and/or bookmark my blog for upcoming changes and updates to the ACA. Thank you for reading, and have a great day!