Copayment (or copay) Information

Before we get started, I need to let you know that copayment and co-payment, and copay and co-pay are all accepted spellings. You will see all of these forms used interchangeably.

The copayment (copay) is the portion of the medical fee which you are responsible for paying. The copay could be a percentage of the charges once the discounted rate has been applied or it may be a set amount.

Here is a bit of history about your insurance copayment:

The co-payment was put into place as an attempt to contain medical costs by restraining you from accessing what wasn’t absolutely necessary. Without the co-payment, the thought was that you would perceive your healthcare as "free" and be tempted to access services every time you sneezed or stubbed your toe. By having to share the burden of payment for your care, you would be less likely to "abuse" your benefits. But, does it really work?

Since 1970’s, studies have examined the effects of the co-payment on general health. The most notable study was the government sponsored, five-year study known as the RAND Health Insurance Experiment (HIE). Those arguing for and against the co-payment were able to use the information from this study that would support each of their arguments. The study basically demonstrated that the amount of the co-payment really didn’t seem to stop people from obtaining care. It also didn’t stop individuals from accessing "unnecessary" care.

However, the co-payment was shown to have a negative effect on lower income individuals in poor health. The presence of a co-payment kept this group of individuals from accessing care that was necessary for controlling their complex medical conditions.

With the cost of healthcare on the rise, the premiums and co-payments have also increased. Pharmacy co-payments have been structured, in many cases, to persuade you to use generic medications rather than the newer, more expensive drugs.

How It Works:

There are several ways your co-pay may be applied. Let’s look at a few of them by using the example of the skiing accident. On your way home from the hospital you have to pick up a few prescriptions. The antibiotic only comes in the non-generic form but you are given the choice of using either the generic or non-generic form for your pain medication.

Your co-pay for a generic medication is $2. Your co-pay for non-generic drugs is $15. You could buy the non-generic pain medication but elect to save some money so you can buy a candy bar too (chocolate, the ultimate comfort food). Your portion of the prescriptions will cost $17 (the generic pain medication plus one non-generic antibiotic). In this case, your co-pay was a set dollar amount.

Here’s the next example:

The day after your return from the hospital, you receive a call from a home care agency. They will be sending a physical therapist to make sure you can safely use your crutches at home and to provide you with some exercises.

You see that your co-pay for home health is 20% of the contracted rate if you use a participating provider and 50% if you use a non-participating provider. You confirm with the agency that they do have a contract with your insurance carrier; in other words, they are a participating provider.

Their contracted rate is $100 per visit. You confirm that your deductible has been paid which means that your co-pay per visit will be $20. In this case, your co-pay is a percentage of the contracted rate.

Last example:

A week later, you have to go to your surgeon to have the sutures removed. The front office person informs you that you have a co-pay for doctors’ visits which must be paid at the time of the visit. Your co-pay is $20. Co-payments for professional visits such as doctors’ visits may be at a set rate or a percentage of the contracted rate. Be sure to check your policy to determine which applies to you.

From the examples, you can see that co-payments come in the form of either fixed rates or a percentage of the contracted rate or usual and customary rate. To know which applies to a particular benefit, you will need to look up the specific service in your benefit booklet. The table at the front of your benefit booklet can act as your quick reference guide for covered services, co-payments and limitations.

Return to Understanding Your Medical Insurance


Continue to Participating Provider Rates versus Non-Participating Provider

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