Copay Vs. Coinsurance - Your Medicare Costs Explained

Medicare costs can get complicated, and most beneficiaries may not be aware of how quickly out-of-pocket expenses like coinsurance and copayments can add up.
Meredith Miller
Published on
December 7, 2018
Updated on
January 22, 2024

Understanding your Medicare costs account for half the battle. From monthly premiums, deductibles, to other out-of-pocket expenses, Medicare beneficiaries are often left confused with how their insurance works. While we may not be able to cover all the ins and outs of your Medicare costs, we are going to explain two major out-of-pocket expenses. So, if you’re ready to learn about the difference between your copay and coinsurance, continue reading below.

Copay Vs. Coinsurance - What's The Difference?

Before we get into the differences between your copay and coinsurance, it’s a probably a good idea to highlight how they’re similar. For starters, both your copayment and coinsurance fall under the same category of out-of-pocket expenses. These expenses are costs that you are liable for as a form of cost-sharing with your insurer on top of your monthly premium.

While these two out-of-pocket expenses have similar names, there is a subtle, yet important difference between the two. First, your copay is a fixed amount that you will need to pay for certain healthcare services, like going in for a routine checkup. The cost is typically outlined in your health insurance policy and varies for procedure or service.

On the other side, you have your coinsurance. Unlike your copay, your coinsurance is not a set amount, it will usually come in the form of a percentage that you will need to pay towards healthcare services you receive. For example, you may have a coinsurance cost of 20%, whereas your copayment may be a set price of $50.

Do They Count Towards Your Deductible?

Typically no, neither your coinsurance nor your copayments will count towards your deductible. In short, your deductible is the amount of money you will have to pay out of your own pocket before your medical benefits even kick in. Your copay and coinsurance are additional out-of-pocket costs that will be split between you and your insurer after your deductible has already been met.

Copayment and Coinsurance Example

Let’s take a look at the following example to better understand how your coinsurance and copay work. For this example, we are going to assume the following breakdown for an insurance policy:

  • Deductible - $2,000
  • Copay - $50
  • Coinsurance - 20%

Let’s say someone with the above policy has undergone a procedure. After receiving their bill, they notice the total comes out to $3,500. First, before their coverage covers any of the costs, they will need to pay the $2,000 deductible. Once the deductible is paid, there is still $1,500 of the medical bill remaining.

According to the policy, the policyholder will need to pay 20% of the remaining bill, which comes out to $300. The insurer will pick up the remainder of the tab.

The example above left out copayments because they typically don’t come into play for larger procedures. However, following up after a procedure with your primary care physician will likely come with a copay. In this case, when the policyholder has their follow up, they will pay $50, while their insurer pays the rest.

Keep in mind, the total cost from the procedure came out to $2,350, which is on top of the monthly premiums you may already be paying. The silver lining is that you only have to pay your deductible once, so if you had the same procedure again, you would only be paying $750 out-of-pocket.

Which Is Better?

When it comes to the better one between both, generally, copay/copayment will prove to be a better option for individuals. While copay fee for smaller items may be high, you will be protected from costs that might go higher during a surgery. When it comes to coinsurance, it might not be the most favorable for you if due to a complication during surgery, your bill could go as high as tens of thousands of dollars.

Benefits Of Copay

Now that we have discussed what both of them are, let’s discuss the pros and cons of both of them. One thing you should keep in mind here is that different insurance health companies have different costs. You should have a good look at them beforehand because they might affect them as well. The benefits of your copay include:

  • Reduces unnecessary medical care
  • Used to achieve specific aims (e.g. high copays for the emergency room to offset low copays for preventive services)
  • Protects you from high costs
  • More predictable

Cons Of Copay

  • Can act as a barrier to care needed
  • May cause reduction in cost-effective services
  • Could reduce provider payments
  • Higher costs for small procedures

Benefits Of Coinsurance

  • Can minimize financial burden
  • Won’t be liable after the out-of-pocket maximum is met
  • Helps reduce other expenses by sharing costs with the insurer and insured
  • Reduces overall medical costs for major procedures

Cons Of Coinsurance

  • Unpredictable costs
  • May reduce deductibles and monthly premium
  • Complications during procedures add to the total cost

Hopefully, now, you have a better understanding of your copayment and coinsurance, two hidden costs of Medicare that can add up quickly. That’s why so many Medicare beneficiaries choose to supplement their coverage with Medigap plans. Luckily, FirstQuote Medicare is the perfect place to explore the different options available in your area.

The best part is that FirstQuote Medicare is completely free to use with no obligation. So, whether or not or are just curious about the different options available to you, want to talk to an experienced agent, or are ready to enroll, we can help. To get started, all you have to do is enter your zip code, answer just a few qualifying questions, and you will be able to start reviewing Medicare quotes in your area today.

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