| Tue, Oct 25, 2016 @ 09:00 AM

Copays, Coinsurance and Other Out-of-Pocket Expenses

Posted by Medicare Made Clear

coinsurance-copay-explained-for-seniorsThere’s a lot of confusion surrounding the definitions of certain health insurance terms. There’s “copayment” and “coinsurance”. Then, there’s “deductible” and “out-of-pocket maximum”. Trying to figure out insurance jargon can be confusing.

Let’s take a look at each of these terms and how they work.

Copayment vs Coinsurance

These are possibly two of the most commonly misunderstood and confused terms when discussing health insurance terms.

Copayment (Copay):  The flat rate dollar amount you are required to pay directly to the provider each time you go to the doctor or hospital, or for each prescription you have filled at a pharmacy. Some insurance plans have a set amount of copays per year and some don’t require copays at all. Some plans waive copayments for preventive visits or child wellness visits. Usually, copays are not required once you have reached your annual out-of-pocket maximum. Your copayment amount is in addition to your coinsurance amount. Usually, a copayment does not count toward your annual deductible, but it does count toward your annual out-of-pocket maximum expenses amount.

Coinsurance: Coinsurance is the portion of the bill you are required to pay for each covered health care service or prescription. The dollar amount is typically a percentage of the total bill. Depending on your plan, the percentage amount may range from 10 to 40 percent or more. Once your annual out-of-pocket maximum has been met, insurance will usually start to pay 100 percent of the covered expenses. Your coinsurance amount does count toward your annual out-of-pocket maximum expenses.

Hear Peter explain copay and coinsurance another way.


A deductible is the amount of money you are required to pay each year toward covered health care services and prescriptions before the insurance company starts picking up part of the bill. Every insurance plan is different, so annual deductibles can range from zero dollars to several thousand dollars per year. Your deductible does count toward your annual out-of-pocket maximum. Hear Peter explain deductibles another way.

Out-of-Pocket Maximum

The out-of-pocket maximum is the total amount of money you are liable for each year for covered health care expenses and prescription drugs, before your insurance kicks in. Copays, coinsurance and deductibles count toward your out-of-pocket maximum. Monthly premium payments do not count toward the maximum, nor do costs for over-the-counter drugs. Every insurance plan is different, but most plans have an out-of-pocket maximum. Medicare Advantage plans must cap the out-of-pocket maximum; in 2014, the out-of-pocket maximum can’t be over $6700.

Out-of-pocket expenses can add up fast. If you have a chronic health condition or a situation that results in high annual out-of-pocket expenses, you may want to consider a Medicare supplement insurance plan (Medigap) from a private insurance coverage to help pay some of your copayments, coinsurance and deductibles that Original Medicare doesn’t cover.


For more information, explore MedicareMadeClear.com or contact the Medicare helpline 24 hours a day, seven days a week at 1-800-MEDICARE (1-800-633-4227), TTY 1-877-486-2048.

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