What Do "Co-Payment" and "Coinsurance" Mean?

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The terms co-payment and coinsurance may seem similar at first glance, but do not mean the same thing. In fact, the only real similarities they share are that both are out-of-pocket medical expenses and both are subject to yearly maximum out-of-pocket limits. Everything else about these costs, including when or whether they’re required, is different. Clarifying these terms can make understanding your health insurance plan much easier.

Out-of-Pocket Expenses

Out-of-pocket expenses are costs that your health insurance plan does not reimburse. However, unlike with a deductible, which is the amount you pay for medical care before your health insurance starts paying, a co-payment and coinsurance are cost-sharing expenses. All three are subject to a single annual out-of-pocket maximum, which means your health insurance company pays 100 percent of medical costs for the remainder of the year when the combined total of deductibles, co-payments and coinsurance reaches the limit.

Co-pay Characteristics

A co-payment is a fixed amount that you pay every time you visit a doctor or fill a prescription until or unless you reach your out-of-pocket limit. The amount is usually minimal and varies according to the service. For example, your health insurance might require a $20 co-payment for a regular doctor’s appointment, a $30 co-payment when you see a specialist and a $5 co-payment for prescription drugs. The amount usually is due at the time of service and with most policies, does not count toward meeting your annual deductible.

About Coinsurance

Coinsurance is a percentage of the cost for medical services that your insurance company requires you to pay. Coinsurance is significantly different from a co-payment. For one thing, it doesn’t start until you meet your plan’s annual deductible. For another, the amount varies according the service you receive. In addition, unlike with a co-payment, the amount is included in your bill, not required at the time of service. As an example, if you have 80/20 health insurance, you pay the entire bill until you meet the annual deductible limit. After this, your insurance pays 80 percent of the bill for covered services and you pay the remaining 20 percent.

Sample Scenario

As an example, assume your health insurance is an 80/20 plan with a $1000 deductible and a $20 co-pay requirement for an office appointment. If you visit the doctor and have not yet met your deductible, you’ll make the $20 co-payment before seeing the doctor and receive a bill for the entire cost of the visit, minus the co-pay amount. If you have met the deductible, you’ll still make the $20 co-payment before seeing the doctor, but the balance due on the bill you receive will only be for 20 percent of the cost of the visit.