What Are Deductibles, Coinsurance, and Copays?

It can seem like insurance companies often use terms you've never heard before. Three of the most common ones are deductible, coinsurance, and copay. A deductible is the amount you need to pay toward your covered medical expenses in a policy year before your health insurance kicks in. Coinsurance is a percentage of your covered medical expenses you pay after you've met your deductible. A copay is a fixed amount you pay at the time of service. The easiest way to explain these is with an example. Let's say Joe's health insurance has a $250 annual deductible, 20% coinsurance for seeing a preferred provider, and copays for doctor's office visits and prescriptions. One day Joe has an accident on his bicycle and he ends up with a swollen knee and a cut that needs stitches. Since this isn't an emergency, Joe goes to an urgent care clinic that's a preferred provider in his health insurance network. Joe's x-rays don't show anything broken, so he just gets stitches and a prescription for a painkiller. This is the first time he's used his insurance policy this year, so Joe hasn't met his deductible yet. That means he's responsible for the first $250 of his urgent care clinic bill, which meets the deductible, then just 20% of the remaining network charges. Joe's insurance company will pick up the remaining 80% of the network charges. At the network pharmacy, he has a $30 copay for his prescription, so that's all he pays for the medication. About 10 days later, Joe goes to his regular doctor to have the stitches removed and pays a $30 copay for that visit. His knee is still bothering him, so the doctor orders an MRI at a preferred provider. Since Joe meets his deductible, he'll only need to pay his 20% coinsurance for the MRI and the insurance company will pay the other 80% of the network charges. So there you have it. A deductible is the dollar amount you'll need to pay toward your covered medical expenses in a policy year before your health insurance starts paying. Coinsurance is a percentage of your covered medical expenses you're responsible for after you've met your deductible. You're sharing the cost of your covered medical expenses with your insurer. A copay is a fixed dollar amount you'll pay at the time of service for certain covered medical expenses like prescriptions and doctor visits.