Common Insurance Terms

November 20, 2014

What is the difference between co-insurance and co-payment?

On occasion, these terms have been used interchangeably. However, it is preferable to define the two terms differently, despite their similarity of purpose. Under a copayment or “Doctor copay” provision, the insured usually is required to pay a set or fixed dollar amount (e.g., $30 or $40) each time a particular medical service is used. Copay provisions are frequently found in more comprehensive medical plans where a nominal copayment is applied to each office visit and to each prescription that is filled.

Coinsurance on the other hand, is defined as the amount and/or percentage that you will pay after your deductible is met, usually up to a set maximum out of pocket.  The most common type of plan that most people are familiar with is an 80/20 plan.  For example, if someone has a $100,000 heart surgery and their coinsurance is 80/20%, this means that the insured will pay 20% of this cost until they have met their Maximum Out of Pocket. Fortunately, this Maximum Out of Pocket is usually capped to an additional $2,000 to $5,000 above your deductible.

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