What is the difference between deductibles, copays and coinsurance?

What is the difference between deductibles, copays, and coinsurance?

Enrolling in health insurance may seem difficult, but what may be even more difficult is understanding your coverage. It is not something that we are taught in school, but knowing about it is something that can benefit us all.

Some Americans may not be receiving medical care because they are not sure what is covered by their health insurance. A 2019 survey by Policygenius found that more than one in four people said doubts about their coverage had led them not to seek treatment. Survey participants also had trouble defining basic terminology used by health insurance, for example, copay, deductible, and premium.

As in many situations in life, information is power. We answer seven questions you might have about health insurance.

What is the difference between deductibles, copays, and coinsurance?

Deductibles, copays, and coinsurance are all medical charges that you’ll have to pay out of pocket, regardless of having insurance.

Copay: This is the flat fee you pay for routine services, such as a visit to your primary care physician, a specialist, an urgent care visit, or a pharmacy visit, and covers your portion of the payment for the visit, visit, or the medicine. Your copay applies even when you haven’t yet met your deductible.

Deductible: The amount you pay (out of pocket) each year before your health insurance begins to pay for your care. In many cases, your copay will not apply to your deductible.

Coinsurance: It is the percentage of the costs you pay for covered services once you have met your deductible. Let’s say you have an 80/20 plan: your insurance will pay 80% and you will be responsible for paying 20%.

When is enrollment open?

The open enrollment period is the period during which you can enroll in health insurance and it happens every year. The time may vary depending on the health care plan you choose. However, if you do not do so within that time frame, you will typically have to wait until the next enrollment period, unless a qualifying event occurs.

  • Medicare: Open enrollment period runs from October through December; however, there are two additional enrollment periods for those with Medicaid for Medicare Advantage and Medigap policies.
  • From the employer: Typically, the enrollment period occurs in the fall for coverage to be effective with the start of the following year, but it can occur at any time of the year.
  • Health Insurance Marketplace – This is a one-stop shop for those who want to purchase affordable health care coverage. Typically, it occurs between November and December.
  • Exceptions: In addition to these timeframes, you may be eligible for health insurance if you fall under any of the following special circumstances:
    • Divorce/Marriage
    • Widowhood
    • Job’s lose
    • Moving to another area
    • Exceeding the age allowed to be covered by parents’ health insurance
    • Expiration of COBRA insurance

Does my insurance cover telemedicine/telehealth services?

Until very recently, the government was very strict about what kind of technology could be used for telehealth services. This has changed with the pandemic. Policies around telehealth services have had to be reinvented as COVID-19 has forced many people to stay home. Currently, several states have laws, known as parity laws, that require private insurers to reimburse health care providers for services provided through telemedicine.

What wellness services are free?

Federal law requires most health insurance plans to provide certain preventive services at no cost, such as immunizations and screenings, but plans may also cover other wellness services. Many employers offer wellness initiatives such as nutritional counseling and exercise programs at their facilities. Even some universities are providing free wellness services to their students. It’s worth looking into with your employer, school, and health insurance plan.

Does my health insurance cover testing and treatment for COVID-19?

Based on the Families First Coronavirus Response Act, Medicare, Medicaid, and private health insurance plans – including grandfathered plans – are required to cover 100% of the cost of health care. COVID-19, with no cost-sharing or pre-authorization requirements for the duration of the emergency period. This includes visits to emergency rooms, urgent care, or doctor’s offices.

Insurers are also required to provide COVID-19 antibody tests at no cost under the Coronavirus Aid, Relief, and Economic Security Act (CARES). For those who are uninsured, states are allowed to use their Medicaid programs to cover testing.

When it comes to coverage for treatment, it can vary. Some insurers have waived copays, coinsurance, and deductibles for in-network care and others will cover out-of-network cost-sharing when in-network services are not available.

We suggest you check with your health insurance plan regarding coverage. You can also check this list of health insurance providers to see what is covered.

Are routine preventive services like colonoscopies and mammograms and breastfeeding support covered by my insurance?

Under the Affordable Care Act (ACT), the costs of many routine preventive care services must now be fully covered by health insurance. This means there’s no copay, no coinsurance, and no deductible to meet first. Those services could include breastfeeding support and counseling, immunizations, colorectal cancer screening, and counseling for breast cancer risk genetics (BRCA) testing.

Do I need a medical referral?

A referral (or referral) is a pre-approval that some health insurance plans require before you can receive treatment from providers other than your primary care physician. Health Maintenance Organizations (HMOs) and Point of Sale (POS) plans require a referral by part of your primary care doctor. Referrals are not required at Preferred Provider Organizations (PPOs) or exclusive provider organizations, but these plans tend to be more expensive than HMO plans.

Managing Your Health Care Costs

During this time of uncertainty, it’s more important than ever to manage your health care costs. There are a couple of options you could consider when it comes to keeping your budget down.

If you belong to a High Deductible Health Plan (HDHP), you could reduce your out-of-pocket costs with financing from a Health Savings Account(HSA). Here’s how it works: By contributing to an HSA, you set aside a certain amount of pre-tax dollars (up to $3,500 for an individual, $7,000 for a family) to pay for qualified medical expenses, including deductibles, copays, and coinsurance. By paying with pre-tax money, you are, in effect, reducing the amount you pay toward your health care costs. You can open an HSA even if your employer doesn’t offer it, as long as you have a qualifying health insurance plan and aren’t enrolled in Medicare. Any money left in the account at the end of the year can be applied to the following year for future use.

Another way to save with pre-tax money is to sign up for a Flexible Spending Account (FSA). Your employer may offer an FSA as part of your benefits package. An FSA sets aside a certain amount of pre-tax dollars (up to $2,700) to pay for qualified medical expenses, similar to an HSA. But an FSA does not require you to be enrolled in a health insurance plan and fully funded from day one. The downside of FSA is that if you don’t spend all the money in the account by the end of your plan year, that money is lost.

You may wish to consult your financial advisor to assess how any of these accounts may impact your final costs.


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