Understanding Copays: How They Work and How They Apply to Deductibles and Out of Pocket Maximums

Copays are a critical part of health insurance plans, playing an important role in affordability of a doctor’s office visit.

What are copays? A copay, short for copayment, is a fixed amount that a policyholder pays out of pocket for a covered health service. It is a form of cost-sharing between the insurance company and the insured individual. Copays are typically applied to services such as doctor’s visits, prescription drugs, and specialist visits.

How do copays work? When an insured seeks medical services such as the ones above, they are required to pay a predetermined copay at the time of services. This amount is usually listed on the insured’s insurance card. For example, a plan may have a $20 copay for a primary care visit and a $50 copay for a specialist visit. Copays are fixed costs; this means that even if the actual cost of the visit is more expensive than the copay the insured will still pay only their copayment.

Do copays apply to deductibles? Deductibles and copays are two separate cost-sharing mechanisms. In most cases copays do not count toward the deductible requirement.

Do copays apply to out-of-pocket maximums? Out-of-pocket maximums, sometimes also called an out-of-pocket limit, represent the maximum amount of money a policyholder is required to pay for covered services during a plan (or sometimes calendar) year. Once the out-of-pocket maximum limit is reached, the insurance company typically pays 100% of the remaining in-network covered expenses for the year. Copayments do contribute toward an out-of-pocket maximum.

Copays can be a useful tool within a health insurance plan as it can make care more accessible and affordable for everyone.