How Do Deductibles, Copayments, and Coinsurance Work?

View Transcript

Making sense of health insurance is far from easy and understanding the jargon can be as confusing as learning a new language.

Whether you’re shopping for health insurance or trying to understand your current plan, we can help explain some of the tricky terms. Let’s start with copayments, deductibles and coinsurance.

Your copayment, or copay, is a fixed rate that you’ll pay out of pocket every time you use your health plan. Copayments vary by plan and can change depending on the type of care you receive.

For example, the copayment you pay to visit a primary care physician is different than the copayment for hospitalization, to see a specialist, and when you seek out-of-network treatment.

Copayments also apply to medications and can vary for specialty and generic drugs.

Your deductible is the amount you’ll pay out-of-pocket each year before your insurance provider begins to cover any medical costs.

However, deductibles don’t apply to all services…most plans will cover routine doctor visits, prescription drugs, and preventive care before you’ve met your deductible. Once your deductible is met, your full benefits will kick in!

Some health plans also have coinsurance. Once you reach your deductible, coinsurance requires that you and your health insurer share the responsibility of paying for your medical expenses.

Let’s say you have a plan with a $1500 deductible and an 80/20 coinsurance. If your costs are less than $1500 throughout the year, you’ll be responsible for paying 100% of the total costs.

If you have a catastrophic injury or illness that requires a lot of medical care, you’ll first pay the $1500 deductible. Your health plan will pay 80% of the remaining costs, leaving you responsible for the other 20%.

MAXIMUM OUT-OF-POCKET LIMIT can also be known as MAXIMUM OUT-OF-POCKET AMOUNT. It refers to the total amount a Member and/or eligible Dependents pay during the course of a year. Member cost sharing including Copayments, Coinsurance, and Deductibles for most covered services count towards the Maximum Out-of-Pocket Amount. If your plan has a Maximum Out of Pocket Limit of $5000, then the most you will pay for your covered services in a year is $5000. If you require significant medical care during a year, you’ll first pay your copayments and other costs up to the $1500 deductible. At that point, your health plan will pay 80% of the remaining costs, leaving you responsible for the other 20% up to $5000. Once you reach $5000 in costs, your health plan will begin to pay 100% of your costs for covered care for the rest of the plan year. “Covered care” may vary depending on your plan.

Hopefully, this has clarified some of the key terms to help you better understand the world of health insurance. It is important to review your plan to understand what is covered under each scenario as plans vary.

Learn more by visiting us online or by calling one of our personal plan advisors at 1-800-741-4825 to help find a plan that fits your needs.

Disclaimer: Optima Health is the trade name of Optima Health Plan, Optima Health Insurance Company, and Sentara Health Plans, Inc. This Plan is underwritten by Optima Health Plan. All Optima Health plans have benefit exclusions and limitations and terms under which the policy may be continued in force or discontinued. For costs and complete details of coverage please call your broker, your Optima Health representative or sign in to