As you evaluate your medical expenses, understanding the difference between coinsurance vs. copay is important. It will help you calculate what you’ll spend for doctor visits, medical procedures and medications.
Coinsurance and copays are similar in the sense that they are the portion of medical care that you’ll pay out of pocket. But how they work, when you pay them and the amount you can anticipate will vary based on your health plan’s benefits. Learn more about these important health insurance terms to manage your finances and health well.
What is Coinsurance?
Coinsurance is the amount of medical care that you’re responsible for after meeting your deductible. The health plan then pays the remainder of the bill.
Many health plans use an 80/20 breakdown when it pays 80% of care and the policyholder pays the other 20%. That means that if you have a bill for $1,000, you’ll pay $200 and the health plan will pay the other $800.
Coinsurance only applies until you hit your out-of-pocket maximum. This term outlines the most money you can pay out of your pocket for medical expenses in a plan year.
If you complete medical care that is not a covered service – such as acupuncture and some alternative weight-loss programs – your coinsurance will not apply. Instead, you’ll have to pay the full bill. That’s why it is important to know what your health plan does and does not cover. Review your explanation of benefits carefully before working with a new provider.
What is a Copay (or Copayment)?
To fully understand the difference between a copay vs. coinsurance, you need to know more about copayments, also known as copays for short.
A copay is an amount that you must pay a medical provider before receiving services. This is generally no less than $10 but can be far more expensive than that depending on your health plan and the care you’re preparing to undergo.
Copays often apply in the following settings.
- Office visits
- Specialist visits
- Urgent care
- Emergency room
- Prescription medication
You’ll be responsible for your copay whether or not you’ve met your deductible. For example, if your health plan outlines a $20 copay for visiting specialists, you’ll be responsible for that expense before seeing the specialist whether you’ve met your deductible. That’s a big difference between copayment vs. coinsurance is that the deductible is not a factor in whether or not the amount applies.
Most health plans cover preventative services entirely, which means you won’t have to pay your deductible, copays or coinsurance.
Key Differences between Coinsurance and Copays
This side-by-side comparison can help you understand how coinsurance and copays work.
| Coinsurance | Copayment | |
| How much does it cost? | Percent of total amount provider bills | Flat dollar amount based on service provided |
| Is it a percentage or a dollar amount? | % | $ |
| When does it take effect? | After you’ve met your deductible | Generally, only before you’ve met your deductible |
| When is it paid? | After receiving services | Before receiving services |
| Does it count toward the deductible? | No | Yes |
| Does it count toward out-of-pocket maximums? | Yes | Yes |
Coinsurance vs. Copayment Cost
Another key difference between coinsurance vs. copayment is that coinsurance is calculated as a percentage while copays are a flat rate. The amount that you’ll pay in these expense categories will vary based on your health plan’s coverages.
In 2023, the average coinsurance rate for primary care was 19%, and the average copay was $26 for primary care and $44 for specialists.
To calculate your coinsurance, you should first look at where you are in paying your deductible since this expense does not apply until you’ve met your deductible.
Then review your health plan coverage to see what your coinsurance rate is. Ask medical providers how much various services cost before undergoing them to learn more. If you have a bill for $200 and your coinsurance is 20%, you’ll be responsible for $40 while your health plan will cover the additional $160.
Copays do not require any calculation as they are set flat fees based on services. You’ll need to read your health plan carefully to find how much various types of office visits and medical providers will cost you to visit. Also, once you’ve met your deductible, most health plans no longer charge the copay.
How Coinsurance and Copayment Affect Deductibles?
Health plans have many terms to learn that can affect your financial well-being. Copays and coinsurance directly relate to your deductible and whether you’ve met that set amount or not.
Coinsurance does not kick in until you’ve met your deductible. So you won’t need to worry about calculating this cost until you’ve paid enough out of pocket for medical care that you’ve met your deductible.
In contrast, copays only apply until you meet your deductible. You’ll need to be prepared to pay these fees before receiving medical services until you have met the total amount of out-of-pocket required to fulfill your deductible. The money you pay in copays does count toward your deductible.
How Coinsurance and Copayment Affect Out-of-Pocket Maximums?
Both coinsurance and copays count toward your out-of-pocket maximum. The out-of-pocket maximum is the most you can pay for covered services in a health plan year. Generally, this amount is several thousand dollars, but every health plan is different.
Once you hit your out-of-pocket maximum, coinsurance no longer applies. The health plan will pay for covered medical services in full.
Calculating Your Total Health Care Expenses
To prepare for medical expenses, you’ll need to know the fees and percentages you’re responsible for before receiving medical care. To do that, you have to know what health insurance terms mean. Review your health plan to see how it calculates these fees. To learn more about your insurance coverage, follow Benzinga Money.
Frequently Asked Questions
Are copays and coinsurance included in all health insurance plans?
Not all health plans require copays but most include coinsurance once you’ve met your deductible but before you’ve reached your out-of-pocket maximum.
Which plan would be more beneficial: one with coinsurance or copays?
Health plans that require copays are generally more beneficial to the person with the plan because it shows that the health plan begins picking up part of the expense before you’ve met your deductible.
Are coinsurance and copays tax-deductible?
Yes, coinsurance and copays are tax-deductible as long as they are not later reimbursed. Common tax-deductible medical expenses include copays, deductibles and coinsurance.
About Rebekah Brately
Rebekah Brately is an investment writer passionate about helping people learn more about how to grow their wealth. She has more than 12 years of writing experience, focused on technology, travel, family and finance. Her work has been published in Benzinga, Hearst Bay Area, FreightWaves and Dallas Observer publications.