Deductible vs. Copayment: What’s the Difference?
If you’re new to health insurance, understanding how much you’re required to pay toward the cost of your health care expenses, when you have to pay it, and how much of the tab your health plan will pick up can be confusing.
Health insurance deductibles and copayments are both types of cost-sharing, which refers to the way health insurance companies split the cost of your health care with you. So, what’s the difference between deductible and copayment? They differ in when you have to pay, how much you have to pay, and what’s left over for your health plan to pay.
What’s a Health Insurance Deductible?
A deductible is a fixed amount you pay each year before your health insurance kicks in fully. Once you’ve paid your deductible, your health plan begins to pick up its share of your health care bills. Here’s how it works.
Let’s say your plan has a $2,000 deductible and counts all non-preventive services towards the deductible until it’s met. You get the flu in January and see your doctor. The doctor’s bill is $200 (after your health plan’s negotiated discount). You are responsible for the entire bill since you haven’t paid your deductible yet this year. After paying the $200 doctor’s bill, you have $1,800 left to go on your yearly deductible.
In July, you fall and break your arm. The bill after your health plan’s negotiated discount is $3,000. You pay $1,800 of that bill before you’ve met your yearly deductible of $2,000. Now, your health insurance kicks in and helps you pay the rest of the bill.
In April, you get your cast removed. The bill is $500. Since you’ve already met your deductible for the year, you don’t have to pay any more toward your deductible. Your health insurance pays its full share of this bill.
However, this doesn’t mean your health insurance will pay the entire bill and you won’t have to pay anything. Even though you’re done paying your deductible for the year, you may still owe a copayment or coinsurance, until you’ve met your plan’s maximum out-of-pocket for the year.
Under the ACA, in 2018, all non-grandfathered, non-grand mothered plans have to cap out-of-pocket costs at no more than $7,350 for a single person and $14,700 for a family. Most health plans cap enrollees’ out-of-pocket costs at levels below these limits, but they cannot exceed them.
The out-of-pocket limit applies to all in-network care that’s considered an essential health benefit. It includes the amounts that enrollees pay for the deductible, copays, and coinsurance; once the combined cost reaches the plan’s out-of-pocket maximum, the member won’t have to pay anything else for the rest of the year (for in-network, medically necessary care that’s considered an essential health benefit), regardless of whether it would otherwise have required a copay or coinsurance.
What’s a Health Insurance Copayment?
A copayment is a fixed amount you pay each time you get a particular type of healthcare service. Here’s how it works.
Let’s say your health insurance requires a copayment of $30 each time you see your primary care physician, $50 each time you see a specialist physician, and $20 each time you fill a generic prescription.
If you see your PCP on May 1, you pay the physician $30 that day. Your health plan picks up the rest of the bill for that visit. When you go back to your PCP on May 5, you have to pay another $30 copayment. Your health plan pays the rest of that bill, too.
Your PCP sends you to a specialist. When you see the specialist on May 12, you pay a $50 copayment to the specialist. Your health insurance pays the remainder of the specialist’s bill.
The amount you pay in copayments generally does not count towards meeting your deductible, but it does count towards your total out-of-pocket costs for the year (thanks to Obamacare, your total out-of-pocket maximum is capped each year). So if you have a $2,000 deductible in addition to various copays to see your primary care doctor or specialist or have a prescription filled, you’d have to meet your deductible for treatments other than those covered by copays.
What’s the Same?
The deductible and the copayment amounts are both fixed amounts, meaning they don’t change based on how much the health care service costs. This is in contrast to another type of cost-sharing, coinsurance, in which you owe a percentage of the bill rather than a fixed amount.
You know when you sign up for health insurance how much your deductible will be that year; it doesn’t vary based on what type of services you get or how expensive those services are. If you have a $1,000 deductible, you’ll pay a $1,000 deductible whether your hospitalization cost $2,000 or $200,000. But some plans have a separate deductible that applies to prescription drugs, in addition to the deductible for other medical services. But it’s still a predetermined, set amount that applies regardless of how much the medical care costs.
You also know when you sign up for health insurance what your health plan’s copayment requirements are since they’re also a fixed amount. When you see a specialist, if your health plan requires a $50 copay for seeing a specialist, you’ll owe $50 whether the specialist’s bill is $100 or $1000 (as long as the specialist is in your health plan’s network, and you fulfill any preauthorization or referral requirements that your health plan has).
Copayment and deductible are also similar in that, thanks to the Affordable Care Act, in the United States certain preventive health care services aren’t subject to copayments or your health plan deductible (unless you have a grandfathered plan). If you see the doctor for a preventive health care visit, even if you haven’t paid a dime toward your yearly deductible, you won’t pay anything toward your deductible for that visit. You won’t pay a copayment for that visit, either (note that some services that might be offered during a preventive visit won’t necessarily be covered in full since the preventive care mandates only require certain preventive care benefits to be fully covered. Check with your insurer before you schedule a preventive care visit to make sure you understand what’s covered and what’s not).
The deductible is generally the amount you have to pay and how often you have to pay it. Deductibles are generally much larger than copays, but you only have to pay them once a year (unless you’re on Medicare, in which case the deductible applies to each benefit period instead of following the calendar year). Once you’ve met your deductible for the year, you don’t have to pay it again until the next year.
But copayments are ongoing. You keep paying copayments each time you get a health care service that requires them no matter how many copayments you’ve paid during the year. The only way you stop owing copayments is if you’ve reached your health plan’s out-of-pocket maximum for the year. Reaching the out-of-pocket maximum is unusual for most people, and only happens when you’ve had really high healthcare expenses that year.