C is for Copays
For better or worse, health insurance has been in the news a lot lately, so we are continuing our series to help you understand different terms that may come up. Today we are discussing copays.
Copays relate to the amount you will pay for care, such as when you see a doctor, fill a prescription, or have a medical procedure. Copays are similar to coinsurance, but we’ll save that for another day.
Copays are generally a flat dollar amount that you pay for care. You may have different copays for different types of care – such as $30 to see your primary care doctor or $50 to see a specialist. Prescription drugs may also have different copays depending on how they are classified.
Copays are paid when you go in for care or pick up a prescription. Some plans may require that you meet your deductible prior receiving care for a copay, or you may have a set number of doctor’s visits with a copay prior to the deductible kicking in. Copays usually apply to your out-of-pocket maximum amount, but do not count towards your deductible.
That’s the a short and sweet definition, and if that’s what you need to know feel free to stop reading! But if you want to go out into the weeds with me, let’s do a bit more digging.
Copays are not always straightforward. Sometimes it gets darn complicated!
Let’s consider 2 plans that have $3000 deductibles and copays of $30 to see your primary care doctor.
Plan A allows unlimited visits to the doctor for $30.
Plan B allows only 4 visits to the doctor. After the 4th visit your deductible applies.
How do these plans compare? Which is better?
Well, if you only see a doctor twice a year, it doesn’t matter – you would pay $60 in copays on both plans. In that case, the copays are not going to influence which plan you choose.
But what if you see your doctor once a month? Then copays could make a difference.
Plan A is easy to calculate: $30 x 12 = $360 for 12 visits.
But on Plan B, we’d have to know what a doctor’s visit would cost. For simplicity, let’s assume it would be $200.
First 4 office visits: $30 x 4 = $120
Deductible now applies: $200 x 8 = $1600
Plan B would cost $1720 for 12 office visits with $1600 applying to the deductible. This is still less than the $3000 deductible, so any additional visits would continue to count towards the deductible.
So which plan is better? On the face of it, plan A is better, but that may not be the case. Assuming that both plans cover your chosen doctor we would also need to know the monthly premium for both plans.
Your premium is a fixed cost that you must pay, even when you do not see a doctor. How does premium impact your total costs for the year?
Plan and Premium Yearly Premium 12 Doctors Visits Total Cost
Plan A, $200/month $2400 $360 $2760
Plan B, $200/month $2400 $1720 $4120
Plan A, $350/month $4200 $360 $4560
Plan B, $100/month $1200 $1760 $2960
From the chart you can see that if the monthly premiums are the same, then Plan A is a better option. But if Plan A is a lot more expensive, then Plan B could make sense, especially if you don’t end up seeing the doctor 12 times.
Copays can be nice for helping budget health care costs throughout the year, but sometimes they can come at a cost. If you rarely see the doctor or if a set number of visits is generally sufficient, it may be worth considering a plan that doesn’t provide unlimited visits. Why pay for what you won’t use?
Previous Posts in the series:
