Why Do Co-Payments & Deductibles Vary?

You might wonder why it costs you $25 to see your doctor, while your friend pays $40. At your last job, the deductible for your health insurance plan was $1,000, but it's $2,500 at your new job. Your health insurance carrier designs insurance plans that determine these amounts. The plan that you (or your employer) select and the premium you pay affect the deductible, co-payments and coinsurance.

Plan Design

• Health insurance carriers must submit their proposed insurance plans and the premiums that the company wants to charge to your state insurance commission for approval before they can be offered for sale. Carriers design an insurance plan with a specific deductible, coinsurance and possibly co-payments for office visits and prescriptions. Along with the designed plan, insurance carriers calculate the premium they need to charge to cover the risk of insuring people in the plan.

Deductible vs. Premium

• If your insurance plan has a low deductible, the insurance company knows that chances are higher that it will have to pay for some of your health care costs than if the deductible was higher. Consequently, the monthly premium, or cost of insurance coverage, will be higher for a low deductible.

Co-payments and Premium

• Your insurance plan may list co-payments for office visits or prescription drugs. Not all plans offer co-payments. Instead, you are responsible for the "reasonable and customary" charge for the service or medication as determined by the insurance company. For example, a doctor may charge $100 for an office visit, but the insurance company considers $80 to be the reasonable and customary charge. If you have a $25 co-pay, you pay $25 and the insurance company pays $55. If you are responsible for the charges, you pay $80. The doctor's office writes off the $20 difference and cannot bill you for it. If your plan has co-payments, you probably pay a higher premium.

Employer Insurance Costs

• If an employer offers group health insurance to its employees, the employer must have a state-mandated percentage of employees enrolled to continue to offer health coverage. Employers are also required to pay for at least part of an employee's health insurance premium. The employer's contribution is regulated by state law. Increasing health insurance costs could force your employer to choose a plan with fewer benefits, higher co-payments and deductibles, or increased coinsurance percentages to be able to afford health insurance costs.