What is the difference between Deductibles, Co-Payments, and Co-Insurance?

It’s that time again.  Each New Year brings about the dreaded rollover of deductibles. The Arthritis and Infusion Center has a few important tips and explanations to help you navigate through the world of insurance.  

A basic understanding of the most common insurance terms will ease tension and frustration at the beginning of the year.  The most frequent terms referred to by your insurance and medical providers are Deductibles, Co-payments, and Co-insurance.  

Deductibles

A deductible is a set amount of money, determined by your insurance provider, which is due from the patient before the insurance provider will start to pay.  In simple terms, you, the patient, must pay that set amount of money, from your pocket, before your insurance will pay any money toward your medical bills.  Typically, deductibles run for a calendar year, and will zero out each January 1^st. 

Example:  Your annual deductible is $500.  Your medical bill is $120 and you have not met your annual deductible.  You will be responsible to pay your medical provider the $120 bill until you have satisfied the $500 deductible.  You will still have $380 remaining before the deductible it is met.

 Co-Payments

Typically, a co-payment is a fixed dollar amount attached to a medical office visit, procedures, or medications.  “Co-pays” do not apply toward the annual deductible. Co-payments are a separate expense to the insured. Co-payments are often a money saving advantage for patients that do not require frequent medical treatment.

Example:  A regular office visit to your primary- care physician has a co-payment of $20.  You are required to pay the $20 and your insurance provider will pay the remainder of the visit. 

Co-Insurance

This is much different than co-payments.  Co-insurance is a percentage of a medical bill that is due from the patient after the annual deductible is met.  Depending on the particular policy, a co-insurance may apply to physician visits, procedures, and medications.  Once the annual deductible is met, the insurance provider will pay the medical provider according to the set contract.  After the insurance provider has paid their portion, it is then the responsibility of the patient to pay the percentage remaining (co-insurance).  A very popular co-insurance scenario for insurance providers is an 80/20 split.  This means the insurance provider pays 80% of the bill and the patient pays 20%.

Example:  Your monthly treatment costs $500.  Your annual deductible is met and your insurance company pays at a rate of 80/20.  Your co-insurance is 20% of the allowable amount.

Understanding your medical expenses can be very confusing.  Don’t be afraid to ask questions in order to obtain a full explanation of charges, payments, and amounts due from you.  A good rule of thumb: always ask medical providers questions before you have a procedure.  Ask about possible charges, if prior-authorization is required, and their in-network status.  A little legwork, prior to your visit to a physician, could save you thousands!