Deductible vs Copay vs Coinsurance

Premium: the cost of having coverage

Your premium is what you pay every month whether you use care or not. It is not part of any deductible, and it never counts toward your out-of-pocket maximum. It is simply the price of being insured.

Deductible: what you pay first

The deductible is the amount you pay for covered in-network care before your plan starts sharing the cost. Until you have met it, you generally pay the full negotiated rate for services that are subject to the deductible.

Deductibles reset each plan year. If you change plans mid-year, you start over — which is one reason switching plans mid-treatment deserves careful thought.

Many plans cover certain things before the deductible — routine preventive care is the most common example, and under the ACA it must be covered with no cost sharing when you stay in network.

Copay: a flat amount

A copay is a fixed dollar amount you pay for a specific service or prescription — a set figure for a primary care visit, a specialist visit, or a 30-day supply of a particular drug.

Copays are predictable, which is their whole appeal. Many plans charge copays for office visits and prescriptions even before the deductible is met, while hospital care and imaging fall under the deductible instead. The split varies plan by plan.

Coinsurance: a percentage

Coinsurance is your share of a bill after the deductible is met, expressed as a percentage. If a plan pays 80% of a covered service, your coinsurance is 20%.

This is where the numbers get large. Twenty percent of a hospital stay is a very different figure from twenty percent of an office visit, which is why the out-of-pocket maximum is the number that ultimately protects you.

Out-of-pocket maximum: the ceiling

The out-of-pocket maximum is the most you will pay in a plan year for covered, in-network care before the plan pays 100%. Once you reach it, covered in-network services cost you nothing for the rest of the year.

Premiums do not count toward it. Out-of-network care usually does not count toward it either. And services the plan does not cover at all never count toward it.

How they work together on one bill

Say you have a $3,000 deductible, a $40 primary care copay, 20% coinsurance, and a $7,000 out-of-pocket maximum. It is March and you have not met your deductible.

• A routine primary care visit costs you the $40 copay — the deductible does not apply
• An MRI billed at $1,200 is subject to the deductible, so you pay the full negotiated rate and it counts toward the $3,000
• You have now paid $1,200 of your deductible, leaving $1,800
• Later, a $10,000 hospital bill arrives. You pay the remaining $1,800 of deductible, then 20% of the balance — about $1,640
• Total paid toward the maximum: roughly $3,440, so you still have room before the $7,000 ceiling

If the bills kept coming, the out-of-pocket maximum would eventually stop the bleeding. That is the number to look at when you are sizing up how much risk a plan leaves with you.

Prescriptions have their own tiers

Drug coverage usually sits on a tiered list. Generic drugs sit on the lowest tier with a small copay; preferred brand names sit higher; non-preferred brands and specialty medications can sit on tiers where you pay a percentage rather than a flat amount.

The same medication can be on completely different tiers at two carriers. If you take anything regularly, check it on each plan before you enroll.

The short version

Premium is the monthly cost of coverage. Deductible is what you pay before the plan shares. Copay is a flat fee for a specific service. Coinsurance is your percentage after the deductible. And the out-of-pocket maximum is the ceiling that stops the total from running away.

Read them together, not individually, and the plan stops being confusing.