What is a Copay?

What is a copay?  If you find yourself purchasing medical insurance for the first time, you need to find an answer to this question.  It is fundamental to understand how a copay works and what services it covers.

Insurance Fundamentals

To understand how a copay works in a medical plan, it is important to understand a basic principle of insurance: instead of an individual risking the chance of financial loss due to an unforeseen event, he or she can pay a price (called a premium) to an insurance company, and that insurance company will assume the risk of the financial loss.  The greater the risk of loss, the greater the premium.

One way to lower the premium of a health insurance plan is to take on some risk of the loss for yourself.  One way to accomplish this is by implementing copays.

So What Exactly is a Copay?

A copay is a flat dollar amount in a health insurance plan that a policyholder pays per event, such as visiting the doctor or filling a prescription.  Once the copay is paid, the insurance company (usually) pays the remaining cost of the claim.

A copay is different from a deductible by the fact that a copay is per event, while a deductible is a flat dollar amount paid just one time during the year.

Is Everything Subject to a Copay?

It depends on the health insurance plan that you have.  A typical major medical plan utilizes copays for things like office visits to primary care doctors, specialists, and the emergency room.  If you pay a copay for these visits, you usually will not be required to pay anything else, although some plans do require you to pay your deductible and/or coinsurance after you pay your copay.

The Patient Protection and Affordable Care Act (PPACA), more commonly referred to as Obamacare, sets a limit on the out of pocket expenses one person can incur.  Copays are counted toward this limit.  Once the limit has been reached, you will no longer be required to pay a copay during that year.

How Can I Know What is Subject to a Copay in My Medical Plan?

Carefully inspect the benefit summary of any medical plan you are thinking about enrolling in.  PPACA  requires insurance companies and group plans to provide a Summary of Benefits and Coverage (SBC) for medical insurance plans.

SBCs are designed to succinctly display the benefits provided by a medical insurance plan.  The SBC makes it easier to compare benefits between multiple plans on an apples-to-apples basis in plain language.

How Can I Know What Copay Level is Best for Me?

That really depends on the amount of risk you are willing to take.  Lower copays will require a higher premium.  For lower premiums, choose a plan that asks you to pay higher copays.

So what is a copay?  A copay is a flat dollar amount you pay for each applicable medical service.

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