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What is a copay in health insurance?

Dino Christoforakis
Dino Christoforakis

Editor in Chief & Licensed Insurance Agent.

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  • Copays can apply to the essential benefits before and after reaching the deductible threshold
  • Copays for network services count towards a plan’s deductible thresholds
  • Copays for network services count toward maximum deductible and out-of-pocket limits
  • Once passed, the maximums require 100 percent insurance coverage of benefits
  • Out of network copays do not count towards deductibles or out-of-pocket limits


Copay is the price the customer pays for a service, and it is usually a small fraction of the actual costs. For example, a $200 CT scan might cost the consumer $40 copay. The consumer may only get one of these at that price in the 12-month insurance cycle.

Comparison shopping is a tool for finding value in health insurance plans. Copays have two roles, first, in some plans they cover benefits before customers reach the deductible threshold, and second, they help keep services available for all and not overused by a few. Free services do not have a copay.

Enter your zip code in our free search box to compare your state’s most affordable health insurance quotes!

Out-of-Pocket Expenses


Copays, coinsurance, and deductibles are each called out-of-pocket expenses. These consumer paid costs are part of the price of health insurance.

Just as the monthly premiums pay for the basic terms of the insurance, copays are part of the costs of services that customer’s use.

One must be aware of the difference between plan limits and the overall Obamacare limit on out-of-pocket expenses.



Networks are groups of doctors and medical care providers that agree to treat patients for agreed prices.

Managed care organizations use networks to set prices and prepare services for diverse populations and territories.

One important difference among them is the way they treat network and outside resources. The below-listed items describe the managed care types.


The ”exclusive provider organization.” It does not cover outside resources; users must pay all of the expenses. Outside spending may not count towards the plan deductible or spending limits.


The “health maintenance organization”; they took the name from the policy to promote wellness and prevention.

The HMO model does not provide cost sharing for outside network resources. Depending on the plan, this spending may not count towards the deductible or the plan’s out-of-pocket limit.



The “private fixed-fee-for-services model.” This type of plan does not offer outside services. The consumer’s spending on outside services may not count towards the out-of- pocket maximum or the deductible. The terms of each plan would provide the details


The ”preferred provider organization” that permits outside resources. It pays a lower share of outside benefits.


The ”point of sale option” for an HMO that lets the primary care doctor refer patients to outside specialists. The POS covers with a lower cost sharing than with network resources.

Why Do Insurers Use Copays?


Insurance companies are for-profit businesses except for a few cooperatives. They wish to make a profit, and small charges for services help them.

The small charges also ensure that people do not overuse a medical service and therefore leave it in short supply from those who need it. If a service were free, then many more people might use it multiple times. Like the Cadillac plans, some plans or items seem too generous.

Copay Limits

Copays cover the consumer and give them a low-cost access to a much higher cost service or benefit. In some plans, copays cover the consumer share before reaching the deductible amount and the coinsurance.

Copays have limits in most plans. Customers can get the service at the copay price for a limited number of times. After that number, customers may have to pay all or a higher share of the service price. Copays can be network copays or outside service sharing.

Copays Help the Consumer


Copays help reach the deductible threshold if spent on in-network resources. Copays that consumers spend on out-of-network resources do not count towards the policy limits. In effect, a consumer spends to cover coinsurance or copays on out-of-network resources raises the contract and maximum overall limits.

In effect, a consumer spends to cover coinsurance or copays on out-of-network resources raises the contract and maximum overall limits.

Consumers with options to use outside resources should consider the impact on their overall costs. Unlike network resources, going outside for services does not help get to the overall limit.

Once past the overall limit, the insurance company must cover the entire charge for the essential benefit.

Obamacare Essential Benefits

There are benefits guaranteed to consumers without annual limits, and some without added charges. These Obamacare prevention essential benefits include screenings, testing, vaccines, and wellness visits.

Applied to the Obamacare Marketplace and Medicare, these benefits added value to these programs as well as promoted the national goals of improved health maintenance.

Consumer Spending and Limits

There are types of spending that health insurance buyers should understand. These terms help buyers make good choices. The below-listed items describe some important terms.

– Copays

These are fixed fees for medical services. The insurance plans designate services that require a copayment and the amount of the payment. Copays count towards the out-of-pocket maximum set in each policy and set by Obamacare rules for every policy.

– Coinsurance

This term refers to the agreed division between the insurance company and the policyholder to share the costs of a service or benefit. It is usually expressed as a percentage.For example, a standard coinsurance in Medicare Part B –Medical Insurance is twenty percent. Medicare pays 80 percent of the allowed cost and leaves 20 percent for the consumer.

For example, a standard coinsurance in Medicare Part B –Medical Insurance is twenty percent. Medicare pays 80 percent of the allowed cost and leaves 20 percent for the consumer.

– Deductibles

Health insurance deductibles are the costs for medical services and benefits that the consumer must pay. Deductibles have a stated amount in the plan, and this is sometimes called a threshold or limit. This amount is the trigger that causes the insurance company to begin paying benefits for the consumer. Once passed, the deductible entitles the consumer to get insurance payments from the insurance company.

– Out-of-Pocket Costs

These costs are consumer paid expenses that have an overall annual limit in the rules issued under the Affordable Care Act. Out-of-pocket expenses do not include out of network cost-sharing or premiums.

Most consumer-paid costs are out-of-pocket expenses, and many are deductible. The federal government passes a rule each year setting the limits for out-of-pocket expenses and deductibles.

Important Limits in Health Insurance


The costs of health insurance would be higher if not for limits on certain categories of spending. In the below-listed items, the Affordable Care Act limits deductibles and out-of-pocket expenses.

  • Out-of-pocket Limit is the maximum overall consumers must pay in the year for out-of-pocket expenses. For 2017, the amount is $7,150 for individuals and $14,300 for families.
  • Out-of-pocket plan limit is the maximum amount set in each plan that the policyholder must pay out-of-pocket for network services for 2017.
  • A deductible plan limit is the maximum amount that the policy holder must pay as set out in each plan for network services. Once passed, the insurer pays all the cost for a covered benefit. Plan limits cannot exceed the overall limits set by the federal government.
  • The deductible limit is the overall maximum consumers must pay in the year for deductibles. For 2017, it is the same as the overall limit: $7,150 for individuals, and $14,300 for families. Once passed, the insurer must pay 100 percent of the costs of a covered benefit.

Reaching the Limit

For the consumer, there is a good side of spending. Once past the limits, the insurance company will pay the entire cost. The below-listed items are consumer spending that counts towards the out-of-pocket limit.

  • Network Copays.
  • Network Coinsurance.
  • Deductible expenses.

Prescription Drug Copays


Medicare Part D provides a Prescription Drug benefit for older Americans. The copays get a large subsidy from Part D. Although they rise in the Donut Hole, Medicare Part D reduces the costs of prescription drugs dramatically.

Copays will vary depending on the terms of the private insurance plan one chooses. Each plan has a drug formulary describing the covered drugs and pricing tiers.

Some pharmaceuticals have higher copays than others. Name brands may carry a higher copay than its generic equivalent.

Copays Add Up


Copays may help reduce abuse and overuse of medical services. The theory goes that if a service were free, people would use it far more than necessary. People can avoid medical care when the expense is more than they can or are willing to pay.

Putting off medical care can make an early detectable and easily treatable disease far worse and costlier. Copays can add up to major amounts for some policyholders who can use a service frequently.

Comparison shopping is a great method for rating features in health insurance plans. One can get the best value by matching policies to individual and family needs.

Copay Depends on the Plan


There are conflicting statements about copays in respected references. Healthcare.com defines them as charges after patients pay the deductible.

Other sources define them as fixed charges applied before and after the customer spends the deductible.

The insurance plans use the term in various ways to describe charges for services. Customers must review their plans to understand which services have copays, the amounts, and the number of times they can use the service at the copay price.

Find the plan you need to stay fully covered and in control of your budget by entering your zip in our free search box below!

[su_spoiler title=”References:” icon=”caret-square” style=”fancy” open=”yes”]

  1. http://obamacarefacts.com/obamacare-preventive-care/
  2. https://www.healthcare.gov/lower-costs/save-on-out-of-pocket-costs/
  3. https://www.healthcare.gov/choose-a-plan/plan-types/
  4. http://obamacarefacts.com/obamacare-cadillac-tax-excise-tax-on-high-end-plans/
  5. http://obamacarefacts.com/health-insurance-networks/
  6. http://obamacarefacts.com/covered-benefits/
  7. http://obamacarefacts.com/essential-health-benefits/
  8. https://www.healthcare.gov/choose-a-plan/your-total-costs/
  9. http://obamacarefacts.com/out-of-pocket-maximums-and-deductible-limits-for-2017-health-plans/
  10. https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/
  11. http://obamacarefacts.com/medicare/medicare-part-d/
  12. http://obamacarefacts.com/insurance-exchange/how-to-buy-health-insurance/
  13. http://healthcare.com
  14. https://www.healthcare.gov/glossary/co-payment/


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