Health Insurance Deductibles, Coinsurance, Copays, and Maximum out of Pocket

You may be like me and you have heard the terms, deductibles, coinsurance, copays, and maximum out of pocket and just went a long with it. But didn’t have a full grasp of how they really worked.

Let’s go through what they are and how they work.

Deductibles, coinsurance, and copays are all examples of cost sharing. Cost sharing is what you and your health insurance company pay for your health care expenses.

What is a deductible and how do they work?

A deductible is the amount you will pay in your plans calendar year for health care services before your health insurance plan begins to pay.

How this works: Let’s say your plan has a $4,000 deductible. You’ll pay 100 percent of eligible health care expenses until all your medical bills total $4,000. You will then share the cost with your plan by paying coinsurance.

What is coinsurance and how does it work?

Coinsurance is what you will pay for medical services received after you reach your deductible. It’s usually figured at a percentage of the amount to be charged for services received. You may know it as 80/20 or 70/30.

How it works: You’ve now payed your $4,000 deductible in health care expenses. Now when receiving medical services, you won’t pay all cost. You will now share the cost with the plan by paying a percentage of the services. For example, let’s say your plan pays 80/20. Your plan would pay 80 percent of the medical cost while you would then pay 20 percent. The 20 percent that you pay is your coinsurance.

What is a copay and how does it work?

A copay is broken down into services received and can vary between each one. Copays are fixed amounts you can pay depending on how your plan is structured.

How it works: Your plan will determine what your copay will be for different types of services. Your plan card may have printed on there for example: office visit $20 copay, or emergency copay $80 copay.

Some plans may even have a copay that you pay before you’ve finished paying towards your deductible. They can charge before your deductible is met or even after the deductible is met. Depending on your plan.

Example: $80 emergency room visit after deductible or $25 copay for every office visit plus you pay for services received towards your deductible or coinsurance.

Plans also have Max Out of Pocket cost.

What does Maximum out of Pocket stand for?

This is the most you would have to pay in your plan for covered services in a plan year. After you spent this amount on deductibles, coinsurance, and copays your health plan would then pay 100 percent of covered benefits. The maximum out of pocket doesn’t include your monthly premiums.

Example: Your deductible is $4,000 and you have a coinsurance of 80 percent payed by insurance plan and 20 percent by you, 80/20. You also have copays for certain services received. Now let’s say your Maximum Out of Pocket in a plan year is $10,000. Once you hit your deductible, payed your coinsurance, and your copays and they all totaled up to $10,000. Your health plan would then pay 100 percent of covered services for the rest of the plan year.

Wrapping it up

All plans work different and have a different structure to them. Make sure you look through how the plans copays and coinsurance work together and how the prescription drug cost work in. Some plans prescription drug plans will have a standard cost, and some will have a cost once the deductible is paid.

Make sure to look through them so you can compare your family situation. One plan does not fit all as we all have different health challenges.

I hope this helps and as always, reach out to me with questions or things I can help you with.