What Is a Copay and Why Do I Need to Pay It?

Read on to learn more about copayments and how it impacts your health plan.

Elderly couple smiling as looking through health plan and copay amounts in kitchen together.

When you seek medical treatment or care, you may be asked to pay a copayment. Copayments are an essential component of your health plan, and it is important to understand what it is and what it is not. Read on to learn more about copayments.

What a copay is

Health insurance companies require members to share the cost of healthcare, often in the form of copayments and deductibles. A copayment, which is typically shortened to copay, is a fixed amount you are required to pay for covered medical services.

The copayment amount depends on your plan and coverage, as well as the type of treatment you are receiving. For example, a copay for a trip to the emergency department will almost always be higher than a copay for a routine doctor’s visit.

When you review your plan information, you should see a breakdown of your required copayments for various types of treatment and service. Many insurance companies have separate copay amounts for primary care visits, specialist visits, urgent care visits, emergency department visits, and prescriptions.

Prescription drug coverage may be further split into tiers, with different copayment amounts for various types of medications. Your health insurance plan may also differentiate between copayment amounts for in-network and out-of-network healthcare providers.

Under the Affordable Care Act (ACA), most plans cover preventive services at 100%, which means you don’t have to pay a copayment or coinsurance. However, grandfathered plans still impose cost-sharing on preventive care.

Not all health plans fall under the ACA regulations, so check with your insurance provider to find out whether preventive services are covered at 100% on your plan. You can also review a list of preventive services on the healthcare.gov site.

Related: How Health Insurance Claims Are Processed

What a copay isn’t

A copay is different than a deductible. Your plan deductible is the amount you must pay per year before your health insurance company will begin covering any approved medical costs.

In most cases, copayments do not count toward the annual deductible, but it depends on your health plan and cost-sharing requirements. However, as part of the ACA, copays must count toward the out-of-pocket annual maximum. Unless you are on an older, grandfathered health plan, your insurance company should apply all copayment amounts toward your out-of-pocket maximum for the year.

A copayment is also different than any required coinsurance, which is the portion of your medical care that you are required to pay for after you have met your deductible. Coinsurance is usually presented as a percentage of medical care.

For example, a health insurance plan might have a $1,000 deductible, followed by 80/20 coverage. This means that after you have met your $1,000 deductible (or paid for your first $1,000 of covered expenses out of your own pocket), your insurance will cover 80% of the remaining covered expenses for the plan year and you would cover the other 20%, up to your out-of-pocket maximum.

After you have met your out-of-pocket maximum for the year, you should no longer be required to pay copayments or coinsurance for covered medical treatment with in-network providers.

Related: How to Find Health Insurance: Ask These 5 Questions

If you are confused by health insurance and what you’re required to pay when seeking treatment, you’re certainly not alone. Take your time in learning the ins and outs of your health plan, so you can better understand your coverage and become a more informed patient as you obtain the necessary medical care. If you have more questions, contact your insurance’s member services team.

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