The Cost of Copays: What You Should Know Before Your Next Provider Visit

To copay or not to copay?

When it comes to their health care insurance, people really fall in love with copays.

I once led a focus group with employees of a manufacturing company that was poised to replace medical and prescription drug copays with coinsurance. The new plan would save employees hundreds of dollars in their paychecks, but the room was a mix of anger and frustration.

Some were worried about having to pay more for care, but most were upset about not knowing how much they’d be paying ahead of time. It became so overwhelming the company eventually backed down.

Wait. How does a copay work? What’s coinsurance? What’s the difference?

If you’re confused, you’re in good company. For all the noise in the news about health care, most Americans—as in 90+ percent—don’t understand the meaning of basic health care terms.

You don’t need to be an HR expert to know how your medical and prescription drug coverage works. But understanding these terms is important—they determine how much you pay.

• Premiums are the amount you (and your employer) pay each paycheck, or each month, to have health coverage.

Like any insurance, the higher the premiums, the more the plan should pay (and the less you should have to pay) when you receive care.

• Your deductible is how much you must pay for care each year before the plan begins to pay. A plan may have deductibles for all medical services and prescriptions, or just some.

As with car insurance, the higher the deductible, the lower the premiums. Premiums for high deductible health plans can be significantly lower.

• Coinsurance means you and the plan share the cost once you meet your deductible. If your plan features 20% coinsurance and a prescription costs $100, you pay $20 and the plan pays $80.
• A copay is a flat dollar amount you pay each time you go for health care services.  You might have a $20 copay doctor visits, a $50 copay for specialists, and a $10 copay for generic drugs.

The amount of the copay usually has nothing to do with the actual cost—it’s set arbitrarily by the insurance company.

Plans with copays for office visits or prescriptions often require you to pay a deductible and coinsurance for other services, such as lab work. If so, copays generally don’t count toward the deductible.

Occasionally, a plan will require a copay plus deductible, usually for things like a hospital stay or ER visit.

Copay vs. Coinsurance: Which is better?

Copays are attractive for their predictability—you know what your cost will be each time you go to the doctor, specialist, or pharmacy.

But multiple visits or prescriptions—especially name-brand drugs—can cause those copays to add up, and they don’t count toward your deductible for other services.

Coinsurance can feel less certain. “How much is an office visit? What do x-rays cost?” Plus, you have a deductible to meet before the plan even begins to pay.

On the other hand, with deductibles and coinsurance, you can expect to pay much less upfront in premiums. And those savings can really pile up over time—especially if you don’t need a lot of care.

When choosing a health plan, the trick is to think about your situation so you get the coverage you need, but don’t pay a lot more in premiums for coverage you may not use.

Whether you choose copays or coinsurance, many plans have cost and quality tools that can help you find good providers and understand your costs before you go for care.

Should I use my copay for prescriptions?

This is where it really gets interesting.

Insurance plans determine how much they’ll pay for different classes of drugs, and set copays and/or coinsurance accordingly, based on negotiations with pharmacy benefit managers, manufacturers’ discounts, and other factors.

Pharmacies are free to set whatever price they want on prescriptions. A drug’s retail price can differ by tens or even hundreds of dollars from pharmacy to pharmacy.

As a result, if you use your insurance—either copay or coinsurance—to pay for a prescription without first checking to see if a lower price is available, you could literally be paying tens or even hundreds of dollars more than you need to!

That’s right: You may be able to save money on prescriptions by NOT using your insurance.

But how will you know for sure?

The good news is, it’s easier than ever to check prescription prices before you make an expensive mistake.  A savings tool like RxSaver levels the playing field by making retail drug prices transparent to consumers.

A tool like RxSaver searches for the lowest prices on prescriptions across multiple discount sources, including manufacturers’ copay cards.

The website and app tool are free and allow you to search for possible coupons for your medication at nearby pharmacies.

In addition, other organizations offer copay assistance programs to help lower the cost of prescriptions.

The bottom line? For medical care and prescription drugs, copays are no better or worse than coinsurance, just different. The key to saving money is seeing the big picture, understanding how your plan pays expenses and knowing the real cost before you go.