Co-insurance vs. Co-payment
Many of the employers I speak with have little to no experience in selecting health plans for their employees. Some are familiar with what medical plan’s co-payments and co-insurance are, but do not understand how they work. Most employers, board members, and employees mistakenly believe the deductible is the most important part of the plan. They think that they must meet their deductible before the insurance company begins to pay their portion. Which can be true, but it’s dependent on what plan you have. Before we dive deeper into co-insurance vs. Co-payment, let us first discuss what the terms actually mean.
When it comes to group insurance, the term co-payment means a stated amount. So long as it’s not followed by after deductible, your co-payment is the amount that you would pay the doctor’s office, before and after you reach your deductible. For example, let’s say you have a $20 copay to see your primary care physician, and a $35 copay to see a specialist. Because the co-pay is not followed by after deductible, your cost for each doctor’s visit would either be $20 or $35. If the co-pay is followed by after deductible, you would be required to pay out of pocket until you reach your deductible and then from that point on, you would pay the co-pay amount.
Co-insurance is very similar to co-payments. The main difference is that co-insurance is a stated percentage, as opposed to a stated amount. When you see your co-insurance, it’s usually displayed as the amount that insurance company will cover. Which, when unaware, the plan could look very costly. For example, I have a lot of employers that see 80% co-insurance and think that’s the amount that the insured must pay. In reality, they have a co-insurance of 20%. The insured always pays the smaller percentage of the two, totaling 100%. Most of the time that you see co-insurance it is followed by after deductible.
When it comes to choosing a health plan for your employees it can be very confusing. You want to make sure you understand at least the basics. Co-insurance and co-payments can sound similar, but depending on which one you choose, it can affect when the insurance company pays their portion.
In my opinion, co-payments are meant for someone who likes to know their costs for healthcare upfront. Whereas, with co-insurance you know the percentage of the bill that you’re going to pay, but you won’t know the amount until you receive your bill for the service.