Copay, Deductible, Out of Pocket Max

I understand you have some questions about your insurance and your out of pocket costs. I will do my best to explain it here for your review.

The fee of $45 that you pay at time of service is what Tricare calls your “Cost-share” amount. This is the share of the cost of care that comes out of your pocket. Cost-share generally includes deductibles, coinsurance, and co-payments.

Though you have met your individual deductible of $150, there is also a family deductible of $254.38. To make it even more confusing, there is something called an “Out of pocket max” for the year which is $3000 of which you have used $663.00. The out of pocket max is the most you will spend out of your own pocket this year for care. After meeting this amount by paying deductibles, co-payments, and coinsurance, your health plan pays 100% for covered services for the rest of the year.

Hopefully that makes it a bit more clear. If not, please feel free to reach me directly and I would be happy to answer any questions you might have.

Definitions

Copay

A copay (or copayment) is a flat fee that you pay on the spot each time you go to your doctor or fill a prescription. For example, if you hurt your back and go see your doctor, or you need a refill of your child’s asthma medicine, the amount you pay for that visit or medicine is your copay. Your copay amount is printed right on your health plan ID card. Copays cover your portion of the cost of a doctor’s visit or medication.

How it works: Your plan determines what your copay is for different types of services, and when you have one. You may have a copay before you’ve finished paying toward your deductible. You may also have a copay after you pay your deductible, and when you owe coinsurance.

Coinsurance

Coinsurance is a portion of the medical cost you pay after your deductible has been met. Coinsurance is a way of saying that you and your insurance carrier each pay a share of eligible costs that add up to 100 percent.

For example, if your coinsurance is 20 percent, you pay 20 percent of the cost of your covered medical bills. Your health insurance plan will pay the other 80 percent. If you meet your annual deductible in June, and need an MRI in July, it is covered by coinsurance. If the covered charges for an MRI are $2,000 and your coinsurance is 20 percent, you need to pay $400 ($2,000 x 20%). Your insurance company or health plan pays the other $1,600. The higher your coinsurance percentage, the higher your share of the cost is. You are also responsible for any charges that are not covered by the health plan, such as charges that exceed the plan’s Maximum Reimbursable Charge.

Deductible

A deductible is the amount you pay each year for most eligible medical services or medications before your health plan begins to share in the cost of covered services. For example, if you have a $2,000 yearly deductible, you’ll need to pay the first $2,000 of your total eligible medical costs before your plan helps to pay.

Out-of-pocket maximum

Out-of-pocket maximum is the most you could pay for covered medical expenses in a year. This amount includes money you spend on deductibles, copays, and coinsurance. Once you reach your annual out-of-pocket maximum, your health plan will pay your covered medical and prescription costs for the rest of the year.

Here’s an example.** You have a plan with a $3,000 annual deductible and 20% coinsurance with a $6,350 out-of-pocket maximum. You haven’t had any medical expenses all year, but then you need surgery and a few days in the hospital. That hospital bill might be $150,000.

You will pay the first $3,000 of your hospital bill as your deductible. Then, your coinsurance kicks in. The health plan pays 80% of your covered medical expenses. You’ll be responsible for payment of 20% of those expenses until the remaining $3,350 of your annual $6,350 out-of-pocket maximum is met. Then, the plan covers 100% of your remaining eligible medical expenses for that calendar year.

Depending on your plan, the numbers will vary—but you get the idea. In this scenario, your $6,350 out-of-pocket maximum is much less than a $150,000 hospital bill!

Whats the difference between copays and coinsurance?