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What is the Difference between a Copay and Deductible?

An Explanation of Benefits shows the copay and deductible amounts that are the patient's responsibility.
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  • Written By: Tricia Ellis-Christensen
  • Edited By: O. Wallace
  • Last Modified Date: 30 October 2014
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The terms copay and deductible may be confusing for some people, since they are related. A copayment can be called a point of service payment, something that a patient would give to doctors, other allied health workers, and possibly to labs when they receive service. In contrast, the deductible is the amount of money that a patient must pay before major services are covered, usually things like hospitalizations or surgery.

Copays are part of a patient's payment toward one particular bill and something he usually needs to bring with him at the time of service. Rates vary, depending upon the type of service a person is getting and the type of insurance he has. This is the patient's payment share of that particular visit.

Like copays, deductibles can be highly dependent on the type of insurance a person has. These amounts are usually figured on a yearly basis, however, and once the total is met, his insurance should cover the rest of the payments — up to a point. Each year when the insurance policy renews, the patient has to start over, paying again until he's reached the deductible.

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For example, if a deductible is $500 US Dollars (USD), this means that, before the insurance company will start paying for services, the patient have to pay $500 USD out of his own pocket. If he went to the hospital to have a surgery, the first $500 USD of that bill would be directed toward him, and he'd have to pay that amount before the insurance company kicked in with payment. Usually deductibles are higher than this, sitting in the range of several thousand dollars.

This is where the difference between copay and deductible gets extremely tricky. In most cases, when a patient has both, insurance will cover their part of things like doctor’s visits before the patient reaches his deductible limit. Therefore, when the new insurance year starts and the patient visits a doctor, he's usually responsible for the copay only and not the deductible amount.

If that patient needs a major or minor operation, however, he'd have to meet that deductible prior to getting reimbursed for the rest of these expenses. Also, in many cases, insurance companies don’t count copays as fulfilling part of the patient's deductible expenses. A lot of insurances charge something different from copay and deductible, and require individuals to pay a percentage of certain expenses. This may be considered a copayment too by some insurers.

Again, from the example of a new insurance year, a patient might need to meet a $1,000 USD deductible, and then also pay a percentage of the remaining amount due for service, which may be called a copayment. If he has surgery and it costs $26,000 USD, the first $1,000 USD is his responsibility alone. On the remaining amount, he might owe a percentage, say 10%. In total, the bill for the surgery would be $1,000 USD plus $2,500 USD, equaling $3,500 USD.

Some insurers also offer a maximum amount that a patient needs to pay in costs per year, which may be the same amount as the deductible. If he has a lengthy hospital stay, the insurer might only require him to pay to that maximum. So, for instance, if the maximum amount a patient needs to pay per year is $2,000 USD, all costs beyond that point might be covered. Other insurers give a maximum amount they will pay within a given year or a lifetime. If a patient's medical expenses exceed this amount, he would need to pay any expenses beyond it.

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Crispety
Post 2

Moldova- Health insurance for seniors is a bit confusing. For example, if a senior that has Medicare were to go into a rehab facility like Care One for example in order to receive rehabilitative services on a knee replacement or a hip replacement, the Medicare deductible would cover 100% of the stay up until the 20th day.

From the 20th to the 100th day in the center, Medicare would cover 80% of the stay and either a secondary insurance like AARP, or the patient themselves would have to pay the remaining costs. These costs can really add up because each day’s stay at a rehab center like this can be $135 a day. This is with an 80% contribution from Medicare.

Normally, for knee or hip replacement rehab most patients stay about two weeks if they were reasonably active and healthy prior to the surgery.

That is the difference between copay and coinsurance. The coninsurance like AARP would only kick in after the primary insurance benefit was exhausted. The copay is what you have to initially pay for the visit which can range from $10 to $25.

Moldova
Post 1

Copays and deductibles can be confusing. A deductible plan is like most health service accounts.

The insurance company requires you to pay for all expenses until you reach their deductible threshold.

For example, a family of four may have a deductible of $1,500 per year. That means that until the $1,500 threshold as been met, the family will continue to pay out of pocket.

Once the threshold has been met then the insurance company will pay for 100% of the cost. This keeps insurance premiums lower because people have to pay for basic care and wellness visits for their children.

People will be more likely to visit a doctor for a check up or wellness visit rather than going to the doctor for frivolous reasons such as having a cold.

Low deductible health insurance means that the threshold is lower. A health insurance example with low deductible might be $250 or $500 for a family of four.

This deductible plan sounds enticing until you realize that the premium health insurance payments are generally higher with this type of plan. Just like with auto insurance or homeowner’s insurance, the higher the deductible, the lower the premium.

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