Why Do Insurance Companies Require a Copayment?

After all the money you spend on health insurance premiums, you may not want to spend additional money when you visit the doctor. Unfortunately, most health insurance policies include some sort of out-of-pocket expense when you require medical assistance, either in the form of a deductible, copay or coinsurance amount. Insurers use copays for a few reasons.

Lower Premiums

• Copays usually run anywhere from $20 to $100, depending on the service you need. Prescription copays might be hundreds of dollars for certain types of drugs. Every copay dollar you spend is one that the health insurance company saves and therefore doesn't need to collect in premiums. You recover your out-of-pocket copay expense in the form of lower health insurance premiums. A policy that does not require copayments would cost more.

Discourage Frequent Visits

• If you've ever gone to the doctor for a minor complaint and her recommendation was to rest, drink lots of fluids and wait for it to clear up, you may have felt that the visit was unnecessary. These visits are also expensive for health insurers and contribute to high premiums. Copays help discourage frequent and unnecessary doctor visits because they cost you money. If you could see the doctor for free all the time, you might get a medical opinion for every bump, cough and itch, which would greatly increase premiums for everyone.

Encourage Inexpensive Alternatives

• Visiting your primary care physician may only cost you $25, but a trip to the emergency room that does not result in hospitalization might cost $100. You may receive the same care either way, but the emergency room costs your insurer more. To encourage you to visit your primary care physician whenever possible and not seek specialized or emergency care without reason, health insurers often price copays to be more expensive for services that cost them more. This principle applies to prescription drugs as well, which is why you generally pay less for generic drugs than you do for the costlier name-brand ones.

Promote Health

• If you desire to spend as little money as possible on medical services, you are more inclined to stay healthy in the first place. Copays help place a greater emphasis on prevention and a smaller emphasis on treatment since medical treatment can cost both you and your insurer a lot of money. To help with this goal, health and dental insurers sometimes waive or reduce copays for preventative physical exams and dental cleanings. Insurers would rather spend a little money to keep you healthy than a lot of money to make you healthy again.