Medical Insurance and Co-pays

If you're shopping around for health insurance, you have probably come across the term "co-payment," also referred to as a "co-pay." Many health care plans offer co-pays as a way to provide coverage choices for policyholders and to help defray costs. Your overall health and financial ability to handle smaller medical expenses play a role in determining the right co-pay level for you.

Identification

• A co-pay is a fixed amount you must pay for a covered procedure under the terms of your health insurance policy. Co-pays are a form of cost sharing between you and the insurance company as you each pay a portion of the expense. Depending on the health plan, you may have several options regarding the co-pay levels you select. Typically, the higher the co-pay you choose, the more of the costs you absorb and the lower your overall premium will be.

Types

• Co-pays are often available with certain types of coverages. For instance, your plan may offer a choice of co-pays for doctor visits, such as $35 for each visit with a maximum of four visits per year. After your fourth visit, you are required to pay the full amount for each subsequent visit. Co-pays may apply to prescription drugs where you pay a fixed amount for brand-name drugs and a lower amount for generic drugs. Certain surgical procedures may also require a co-pay.

Co-pay vs. Co-insurance

• Some health plans may offer co-insurance as well as co-pays, and the two are often confused. While co-pays provide a specific dollar amount for a covered service, co-insurance works on a percentage basis. For instance, if your plan includes an 80/20 co-insurance feature, it means that once you have met your deductible limit, you and your insurer will share additional costs on an 80/20 basis, with the insurer paying 80 percent and you paying 20 percent. Once you reach your required out-of-pocket maximum, your insurer will then pay 100 percent of the costs.

Managing Costs

• Along with co-insurance and deductibles, effective co-pay management can help you control your health care costs. For instance, if you are relatively healthy and don't visit the doctor frequently or take prescription drugs, choosing the highest co-pays allowed under your policy can help lower your health insurance premiums. By setting money aside for smaller health care expenses, you may also be able to get by with a higher co-pay amount.