How a Copay Works

Understanding Your Health Insurance Copayment

Father and son at Dr Office paying copay.
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A health insurance copayment is a fixed amount you pay each time you get a particular health care service. For example, you might pay a $35 copay each time you see your primary care physician; the rest of that doctor’s bill is paid by your health insurance.

The Basics

Your health plan defines which health care services require a copayment and which don’t. It also defines how much those copayments will cost.

Every time you get a health care service that requires a copayment, you pay the copay and your health insurance pays the rest of the cost of that service. If you have a $30 copay to fill a prescription, you’ll pay $30 whether that prescription costs $25 or $400. If you have a $25 copay to see your doctor, you pay $25 every time you see your doctor whether you see her one time this year or 30 times.

Which health care services require a copayment and which don’t vary from health plan to health plan. Copay requirements are common for

  • doctor visits.
  • visits to emergency rooms, urgent care clinics, or retail clinics.
  • filling prescriptions.
  • visits to physical therapists, occupational therapists, and speech therapists.
  • visits to psychologists, mental health counselors, and psychotherapists.

The amount of copayment your health plan requires will vary by the type of service. You might have a $20 copay to see your doctor, a $30 copay to fill a prescription, and a $150 copay to use the emergency room.

Copayments, deductibles, and coinsurance are all forms of cost-sharing. Cost-sharing was designed by health insurance companies to fulfill two purposes. First, cost-sharing shifts part of the cost of your health care onto your shoulders so your health plan pays less. Second, because you have some skin in the game, cost-sharing is meant to motivate you to shop wisely and seek out cost-effective health care options.

For example, if you have a $150 copay to use the emergency room but only a $50 copay to use an urgent care center, you’re more likely to have your sprained ankle evaluated at an urgent care center than at an emergency room.  While your cost-conscious choice saves you $100, the cost-savings your health plan reaps might be in the thousands.

Preventive Care and Copayments

Thanks to the Affordable Care Act, preventive care is exempt from cost-sharing. If you’re seeing the doctor for preventive care, you won’t have to pay the usual copayment; your health plan will pay the entire cost of that visit.

However, if, during your preventive care visit, you also ask your doctor to address an issue that isn’t preventive in nature, your doctor may have to submit billing codes for both the preventive care and the  non-preventive care to your insurer. In this case, you would have to pay a copayment for that visit even though you’re getting preventive care services. The copay isn't a payment for the preventive care; it’s for the non-preventive care you received during the same visit.

Tiered or Stacked Copay Levels

Your health plan may charge increasingly expensive copayments for increasingly expensive levels of care within the same type of health care category. This is common in prescription drug coverage where a health plan’s drug formulary might divide covered prescription drugs into 3 or 4 different levels charging a different copay for each level. For example,

  • brand-name drugs that have been on the market for a long time and are relatively affordable might have a copay of $35. (Many health plans refer to these as “preferred brands.”)
  • brand-name drugs that are newer or more expensive might have a copay of $75.

Copayments Are Capped by the Out-Of-Pocket Maximum

Since you have to pay the copayment each and every time you receive a health care service that requires one, copayments can really add up if you have a chronic or severe illness and need to get health care frequently. That’s why the Affordable Care Act requires that non-grandfathered health plans have an out-of-pocket maximum that limits the total amount you pay in cost-sharing for the year.

Once you’ve paid enough in of deductibles, copayments, and coinsurance to have reached your health plan’s out-of-pocket maximum that year, you stop paying. Your health plan pays for 100% of the cost of your health care for the rest of the year.

A few caveats about the out-of-pocket maximum:

  • It’s usually a very large amount, in most cases over $6,000 per year for an individual.
  • The protection of the out-of-pocket maximum only covers the essential health benefits. Even after you’ve reached the out-of-pocket maximum, you can still be charged copayments for care your health plan covers as an extra benefit, beyond the essential health benefits it’s mandated to cover.
  • You may not be protected by your health plan’s out-of-pocket maximum for care you receive from an out-of-network provider. With some health plans, you pay 100% of the cost of out-of-network care even after you’ve reached the out-of-pocket maximum. Other health plans may pay part of the cost of your out-of-network care, but have two separate out-of-pocket maximums: one for in-network care and another larger one for out-of-network care.
  • There are some types of health insurance that don’t have to include the protection of the out-of-pocket maximum. These include short-term health insurance, grandfathered health plans, and Original Medicare (that’s Medicare Part A and Medicare Part B, but not Medicare Advantage.)

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