How Do Co-pays and Deductibles Work?

Understanding insurance application forms and terms can be a challenging task. Co-pay and deductible are somewhat related, thereby easily confused to mean the other, especially to those who do not have background knowledge on insurance.  But there are points that must be known about co-pay and deductible. If you know the differences between co-pay and deductible, it would be easier for you to understand which insurance you can best benefit from.

A copayment is also known as a point of service payment. It is the payment that you give to doctors, allied health workers, and laboratories for the services they provide you with. It is a partial payment for a particular bill and something that the patient must bring with them during service. Co-pay rates differ and depend on the type of service received and the type of insurance coverage you have. Co-pay rates may range from $5 up to $40. Your share of the payment may fall under the mentioned rates.

On the other hand, deductibles are the amount that is required to be paid for before a major service will be covered. These major services may be things like hospitalizations and surgery. Just like in co-pay, this amount is dependent on the type of insurance, and it is done on a yearly basis. When insurance is renewed every year, you start fresh and it is assumed that no money has been paid towards the deductible.

For example, your deductible is $600. Before your insurance company will pay for any medical services that you avail of, you need to pay the $600 from your personal savings. If you went to the hospital to have a minor surgery, the bill will be paid by you. The insurance company will only cover you for your medical expenses once you have paid the total $600. Deductibles are usually high and range in several thousand dollars.

In some cases, if you are covered for co-pay and deductible, the insurance company will only cover you for expenses concerning your visits to the doctor, until you have reached your deductible limit. Thus, when your insurance is renewed and you visit a doctor, you are responsible for co-pay only.

But if you will be undergoing surgery, you need to meet the deductible amount before your insurance company reimburses your expenses. You should know that there are cases when insurance companies do not consider co-pays as partial payment for deductible costs. Several insurance companies set a percentage of certain expenses that are required to be paid by the insured.

For Example, your insurance policy has been renewed; you have a deductible amount of $1,200. In addition to that, you are also asked to shell out a certain percentage of the outstanding amount due for the service. This is called copayment. Let’s say the surgery will cost $25,000. The first payment of $1,200 is your responsibility plus the percentage that you need to pay, which is around 10%.  The amount you need to pay for your surgery would be $1,200 plus $2,380, which sums up to $3,380.

The difference between co-pay and deductible is minimal, which makes it confusing. If you decide to be covered under these policies, make sure that you understand the limitations of each policy.