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Out-of-Pocket Health Costs Explained: Deductibles, Coinsurance & Copays

Out-of-Pocket Health Costs Explained: Deductibles, Coinsurance & Copays
Holly Johnson
Updated August 11, 2021
4 Min Read

Having health insurance can make budgeting for healthcare easier, but that doesn't mean you're entirely off the hook when it comes to out-of-pocket costs. Like it or not, most health insurance plans require you to have some "skin in the game" in the form of copays, coinsurance and deductibles. These costs can add up when you visit the doctor frequently, and they will play a significant role in how much you pay for healthcare throughout the year.

Key Takeaways:

  • A deductible is the amount of money you need to pay for healthcare before your health insurance plan begins picking up a share of the bill.
  • Coinsurance is a percentage of costs you'll cover after your deductible is met and until your annual out-of-pocket maximum has been reached.
  • A copay is a flat fee you pay when you visit the doctor or fill a prescription.

What is a deductible?

When you shop around for health insurance plans, one of the first things you'll notice is the deductible for different levels of coverage. A deductible is the amount of money you need to pay within a year before your health insurance plan begins picking up part of the tab. If you have a $5,000 annual deductible, for example, you'll need to pay the first $5,000 in eligible medical costs before your health insurance plan kicks in.

Deductibles can vary widely, with some plans featuring higher premiums and a lower deductible, vs. a higher deductible and lower monthly premiums. Some plans with high enough deductibles even qualify as a high deductible health plan, or HDHP. 

In 2021, HDHPs can include individual plans with a deductible of at least $1,400 and family plans with a deductible of at least $2,800. Conversely, a HDHP also comes with annual out-of-pocket maximum limits of $7,000 for an individual and $14,000 for a family.

What is coinsurance?

Once you have met your deductible, you may still not be off the hook when it comes to covering medical costs. Coinsurance is another out-of-pocket medical expense you'll need to pay after your deductible has been paid, but before you reach your annual out-of-pocket maximum.

The out-of-pocket maximum amount represents the annual limit of healthcare expenses you can be asked to pay (including your deductible, coinsurance and copays) before your health plan covers all your medical expenses for the remainder of the year.

Let's say your coinsurance is 30 percent, which leaves your health insurance plan paying 70 percent after your deductible is met. In this case, you would meet your annual deductible before paying coinsurance, at which point you would split medical costs 30/70 until your annual out-of-pocket maximum is met.

What is a copay?

In addition to deductibles and coinsurance, many individuals with health insurance also pay copays. A copay is a flat fee you pay when you fill a prescription or go to the doctor. Depending on your plan, your copays may or may not count toward your deductible.

Not all plans have copays, and even those who do may not charge them in certain situations. For example, most health insurance plans include annual checkups and preventative care at no cost, meaning you would not pay a copay for these visits.

What are the differences between them?

Deductibles, coinsurance and copays may all need to be covered before your health insurance plan begins footing the entire bill for your healthcare each year, yet they all work slightly differently. 

Coinsurance vs. Copay

Depending on your healthcare plan, you may have coinsurance and copays to cover. Where you'll pay a flat fee known as a copay each time you visit the doctor or fill a prescription, you don't begin paying coinsurance until your deductible has been met. 

CoinsuranceCopay
How you pay itPaid as a percentage of healthcare costsFlat fee when you visit the doctor or fill a prescription
When you pay itAfter deductible has been metPaid at the time of service
Counts towards deductible?You only pay it after you meet your deductibleMay or may not count toward deductible depending on your plan

Coinsurance vs. Deductible

Remember that you meet your annual deductible before your health insurance begins picking up its share of your medical bills, and that you pay coinsurance as a percentage of shared expenses after that. 

CoinsuranceDeductible
How you pay itPaid as a percentage of healthcare costsServices are billed to you by healthcare providers, and you pay until you meet your deductible
When you pay itAfter deductible has been metPaid at the time of service or when you receive a bill
Counts towards deductible?You only pay it after you meet your deductibleEligible medical expenses count toward your deductible

Deductible vs. Copay

Where your deductible is an annual amount you have to pay before your health plan begins covering a share of the bill, you may pay a copay each time you use healthcare services. Copays are generally a flat fee that is meant to be affordable, yet not all plans charge copays at all.

DeductibleCopay
How you pay itServices are billed to you by healthcare providers, and you pay until you meet your deductibleFlat fee when you visit the doctor or fill a prescription
When you pay itPaid at the time of service or when you receive a billPaid at the time of service
Counts towards deductible?Eligible medical expenses count toward your deductibleMay or may not count toward deductible depending on your plan

How to Save Money on Out-of-Pocket Healthcare Expenses

While there are few ways to save money on out-of-pocket healthcare expenses outside of limiting the care you receive, you can always consider opening a Health Savings Account (HSA) provided you have an eligible high deductible health plan (HDHP). With a Health Savings Account, you can save money for out-of-pocket healthcare expenses on a tax-advantaged basis, and you can even invest your HSA funds so they grow over time.

In 2021, individuals can contribute up to $3,600 to a HSA, and families can contribute up to $7,200. HSA catch-up contributions for those ages 55 and older are set at $1,000 per year.

Frequently Asked Questions (FAQ)

The following questions and answers can help you learn more about health insurance and the out-of-pocket medical expenses you may need to pay.

Do copays count toward the deductible?

Copays may or may not count toward your deductible. This depends on your health insurance plan and how it is set up.

Do I have to meet my deductible before copay?

If your health insurance plan requires copays, you will pay them each time you visit a doctor or have a prescription filled until your annual out-of-pocket maximum has been met.

Do I have to pay a deductible for a doctor visit?

You do not have to pay a deductible for a doctor visit. In most cases, you will pay a copay to visit the doctor.

What payments go towards a deductible?

Expenses that typically count toward a deductible include hospital bills, surgery, lab tests, anesthesia, CAT scans, MRIs, doctor and therapist visits that do not use a copay and more.

What happens if you don't meet your deductible?

If you don't meet your deductible, your health insurance plan will not share the bulk of your medical costs for the year.

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