Copay vs. No Copay

Some health insurance policies require co-payments, which are the set fees the insured person pays when visiting a doctor, purchasing prescriptions, or receiving other medical services. Employers often work with health insurance providers to decide, based on the needs of the company and its employees, whether to require copays. Your employer might also offer a choice of insurance plans with and without copay requirements.

The health insurance policy provides copay rules, such as when a copay is required and how much is paid for each type of provider, facility, service and procedure. Copay amounts often differ for visits to specialists and primary care physicians – or for care provided by different types of facilities. Some policies use a range of copay amounts for prescription medications.

Policies often require higher co-payments for physicians who are not members of the health plan’s provider network. Patients pay the required copay each time services are provided.

Co-payments are part of the cost-sharing structure that divides health care costs between employers and employees. Premiums, portions of which are paid by employers and employees, are the periodic payments you make to the insurance company for your health insurance policy. Deductibles and co-insurance are part of the cost-sharing structure.

The deductible is the fixed amount the insured must pay before the insurer begins to pay portions of medical bills during a calendar year. For instance, an insurance policy that has a $500 deductible would require the insured to pay $500 for covered medical expenses before the insurance provider begins to pay.

Co-insurance is the percentage split that the employee and the insurer pay after the deductible is met. For instance, with a 20/80 split, the insured pays 20 percent of a $100 doctor's bill, or $20, and the insurance provider pays the remaining 80 percent, or $80.

Managed care, a type of health insurance that keeps costs low by using provider networks and negotiating discounts, requires co-payments.

A health maintenance organization, or HMO, is basically a network of many kinds of health care providers, which, among others, includes doctors, dentists, physical therapists, psychotherapists, pharmacies and hospitals. An HMO plan, which usually costs less than other types of insurance, controls costs by requiring the insured to use providers in the network. The HMO pays 100 percent of covered health care costs after the insured pays the co-payment.

A preferred provider organization, or PPO, plan also involves a network of participating health care providers; however, PPOs tend to have larger networks than HMOs – and make it easier to get out-of-network care. A PPO plan also requires co-payments but allows the insured to see out-of-network doctors by paying higher co-payments and more out-of-pocket expenses.

An advantage for the employee is that the provider adds the copay to the out-of-pocket expenses, which helps in reaching the deductible and eligibility for co-insurance payments. The copay also contributes to the employee’s maximum out-of-pocket, which is the maximum amount of payments the insured will make during a calendar year. After the maximum amount of payments required under the policy are made, the insured does not pay for covered health care costs for the remainder of the year.