Deductible vs. Copayment: What's the Difference?

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If you’re new to health insurance, understanding how much you’re required to pay toward the cost of your health care expenses, when you have to pay it, and how much of the tab your health plan will pick up can be confusing.

Health insurance deductibles and copayments are both types of cost-sharing, meaning you pay for part of the cost of your health care, and your health insurance pays for part of the cost of your health care.

So, what's the difference between deductible and copayment? They differ in when you have to pay, how much you have to pay, and what’s left over for your health plan to pay.

What’s a Health Insurance Deductible?

A deductible is a fixed amount you pay each year before your health insurance kicks in fully. Once you’ve paid your deductible, your health plan begins to pick up its share of your health care bills. Here’s how it works.

You have a $2,000 deductible. You get the flu in January and see your doctor. The doctor’s bill is $200. You are responsible for the entire bill since you haven’t paid your deductible yet this year. After paying the $200 doctor’s bill, you have $1,800 left to go on your yearly deductible.

In March, you fall and break your arm. The bill is $3,000. You pay $1,800 of that bill before you’ve met your yearly deductible of $2,000. Now, your health insurance kicks in and helps you pay the rest of the bill.

In April, you get your cast removed. The bill is $500. Since you’ve already met your deductible for the year, you don’t have to pay any more toward your deductible. Your health insurance pays its full share of this bill.

However, this doesn’t mean your health insurance will pay the entire bill and you won’t have to pay anything.

Even though you’re done paying your deductible for the year, you may still owe a copayment or coinsurance.

What’s a Health Insurance Copayment?

A copayment is a fixed amount you pay each time you get a particular type of health care service. Here’s how it works.

Let’s say your health insurance requires a copayment of $30 each time you see your primary care physician, $50 each time you see a specialist physician, and $20 each time you fill a generic prescription.

If you see your PCP on May 1, you pay the physician $30 that day. Your health plan picks up the rest of the bill for that visit. When you go back to your PCP on May 5, you have to pay another $30 copayment. Your health plan pays the rest of that bill, too.

Your PCP sends you to a specialist. When you see the specialist on May 12, you pay a $50 copayment to the specialist. Your health insurance pays the remainder of the specialist’s bill.

What's the Same?

The deductible and the copayment amounts are both fixed amounts, meaning they don’t change based on how much the health care service costs.

This is in contrast to another type of cost-sharing, coinsurance, in which you owe a percentage of the bill rather than a fixed amount.

You know when you sign up for health insurance how much your deductible will be that year; it doesn’t vary based on what type of services you get or how expensive those services are. If you have a $1,000 deductible, you’ll pay a $1,000 deductible whether your hospitalization cost $2,000 or $200,000.

You know when you sign up for health insurance what your health plan’s copayment requirements are, also, since they’re a fixed amount. When you see a specialist, if your health plan requires a $50 copay for seeing a specialist, you’ll owe $50 whether the specialist’s bill is $100 or $1000.

Copayment and deductible are also similar in that, thanks to the Affordable Care Act, in the United States preventive health care services aren’t subject to either copayments or your health plan deductible. If you see the doctor for a preventive health care visit, even if you haven’t paid a dime toward your yearly deductible, you won’t pay anything toward your deductible for that visit. You won’t pay a copayment for that visit, either.

What's the Difference?

The deductible is a once yearly thing. Once you’ve met your deductible for the year, you don’t have to pay any further deductible until next year.

The copayments are ongoing. You keep paying copayments each time you get a health care service that requires them no matter how many copayments you’ve paid in the past. The only way you stop owing copayments is if you’ve reached your health plan’s out-of-pocket maximum for the year. Reaching the out-of-pocket maximum is unusual and only happens when you’ve had really high healthcare expenses that year.

How They Work Together

Learn how your deductible and copay interact in "Do Copays Count Toward Your Health Insurance Deductible?" and "What Counts Toward Your Health Insurance Deductible?"

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