Question: I get confused between what a copayment is and what a coinsurance is. Can you tell me the difference? Thanks!
Answer: I'll be happy to. This is a very common question amongst health insurance consumers. The first thing to remember is that a copayment is a fixed dollar amount and coinsurance is expressed as a percentage.
Traditional health plans have a copayment for office visits, prescription drugs and occasionally for emergency room visits. A typical office visit copay for an individual PPO plan would be between $25-40, prescription drug copay between $10-50 and ER visit copay $100, though the latter is usually subject to the deductible and coinsurance. I'll come back to what this means later. If your plan has a copayment and you visit the doctor or the pharmacy, you'll be asked to pay a set amount at the time of service.
Coinsurance works differently. There are certain expenses, usually hospital related, that you will need to pay for until you meet your annual deductible. If you meet your deductible you will usually also be responsible for a percentage of your expenses thereafter up to a total out of pocket amount ranging anywhere from $2,000-5,000 per year. A typical coinsurance would be 20% which means that you would be responsible for 20% of your expenses once you have met your deductible. Coinsurance is most often capped which means that, even if you had, for example, $200, 000 in medical expenses in any one year, you would only be responsible for, say, $5000 during that calendar year. Its purpose in requiring that the consumer accept responsibility for a percentage of their health expenses while the insurance company takes on the greater risk associated with critical illnesses means that the cost of the insurance is kept to as low as possible.