Definition of Copay
Copay also called copayment or co-payment is a health insurance term. Even when you have an insurance cover (like a HMO plan or a PPO plan) you have to pay for a part of your health care expenses. Insurance companies will make you pay under three heads.
- Copay
- Co-insurance
- Deductible
Let’s try to understand the meaning and implication in detail.
Copay Explained With Help of An Example
Our protagonist, lets call him Mr. Will Smith, buys an PPO individual health insurance plan from a reputed health insurance carrier. He pays a monthly premium of $293. Even though Mr Smith is covered the insurance company will not pay 100% of his health care expenses. He will have to pay a small amount from his pocket every time he visits a doctor, receives a treatment, buys medicine from a pharmacy, or gets a surgery done. Basically the health insurance company makes the insured assume a portion of the risk. Sometimes the risk assumed by the insured is not trivial.
Let’s say Will visits a physician or a specialist. As per the terms of his health insurance for the first three visits in a year he will have to pay $45 from his pocket towards the doctor’s fee. The insurance company will pay the rest. The money Will is paying is called copay. It is a fixed dollar amount which insured has to pay even for covered health care. It is usually due at the time of service. If a health care procedure is not covered under the insurance then the insured has to pay the full cost from his pocket.
Let’s take another example. Mr Smith receives an outpatient surgery performed at an ambulatory surgery centre. For this he will pay $250 + 35% of the cost of the surgery. In this case copay is $250. Another 35% that he has to pays is called co-insurance. We will cover co-insurance in detail in another article.
Most Expensive Copay Health Care Services
As we have seen some health care services like visit to a doctor have a low copay while some will burn a hole in your pocket. Copayment amount for health care services differs from plan to plan and from one state to another. We analyzed 10 individual PPO plans from California, Texas, and Florida and found the the following health care services require the insured to pay the highest copay.
- Emergency room Services resulting in admission – Some plans require you to pay $1000.
- Hospital Benefits – Some plans have a high out of pocket expense of $1000 per admission.
- For emergency room Services not resulting in admission some plans require a payment of $100.
- Outpatient surgery in hospital will make you poorer by $500 inspite of having insurance.
- Doctor and specialist visit have a low copayment of $30-$50.
What is Copayment Maximum?
As we have seen copayment amount is not trivial. The saving grace is that most plans also have a calendar year copayment maximum. For Mr Smith’s plan this amount is $5,500. This means he will not pay more than $5500 in any one calendar year as copayment come what may.
Copay Model is On a Decline
Health insurance plans come in two broad flavours. One is copay heavy and the other one is co-insurance heavy. Over the last two decades health insurance benefits offered by employers were copay heavy ones. But this is changing now. Employers are shifting to coinsurance heavy insurance policies. Some argue that bill management is the biggest hassle with the co-insurance model.
Other Pages Explaining Copay
Copayment as explained by Wikipedia. Difficult to understand but you can read it if you must. In a few years time Wikipedia will be in Latin. Investopedia’s definition. Not a great definition but very concise. Good for answering an interview question. Sweet and simple definition at healthcare.gov. Difference between copayment and coinsurance.
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