A deductible is the set amount of money you pay out of pocket for covered services per plan year before your insurance plan starts to pay. A copay is also a set amount of money, but it’s the fixed fee attached to certain covered services. Both copays and deductibles are examples of out-of-pocket payments, but they’re two separate payments that you pay in addition to a monthly premium.
When it comes to comparing copays versus deductibles, the biggest difference comes down to how much you’re paying and when. Let’s get into the details, starting with deductibles.
A quick explanation of deductibles
Once your deductible is met, your insurance will begin covering some or all of the cost of services. As an out-of-pocket cost, your deductible typically also contributes to your out-of-pocket maximum.
Deductibles apply to most services covered under your plan, as detailed in the policy terms. If the service isn’t covered, you’re responsible for the full cost — regardless of whether you’ve reached your deductible or not.
It’s also important to note that insurance plans sometimes have multiple deductibles:
- Prescriptions: If your policy covers prescriptions, there may be a deductible that’s separate from other medical services.
- Family plans: Typically, health insurance plans that cover multiple members of a family have two deductibles: one for the individual policyholder and one for their immediate family.
There are some types of care that don’t require you to meet your deductible before your provider covers the cost. Typically, routine exams, cancer screenings, and other types of preventive care are often fully covered.
How does your deductible relate to your out-of-pocket maximum?
“Out-of-pocket maximum” refers to the most you pay for covered services in a plan year. Once that limit is reached, insurance covers the cost of covered services. Your deductible contributes directly to reaching your out-of-pocket maximum (and so do copays, typically).
A quick explanation of copays
A copay, or copayment, is a fixed fee applied to services covered by your insurance. Most plans have different copays for different types of treatment, but they’re always a fixed amount — a $100 emergency room copay will always be $100, regardless of what the emergency is. Keep in mind not all plans use copay either.
Do copays count toward deductibles?
Copayments generally don’t contribute towards reaching your deductible. Some insurance plans won’t charge a copay until after your deductible is met. (Once that happens, your provider may charge a copay as well as coinsurance, which is another out-of-pocket expense.) Other plans may charge copayments from the get-go, even as you’re still working toward your deductible.
Certain services can also have a copay associated with them, but no other expenses. For instance, some plans might charge a copay for a standard doctor visit appointment, but you wouldn’t have to pay anything more than that, even if you hadn’t hit your deductible yet. Keep in mind, some preventive services must be fully covered, so pay special attention to that subset of care when reviewing your policy.
Copayment vs. deductible in action
To make it all a bit easier to understand, let’s look at an example. Alex has signed up for a traditional health insurance plan through his employer’s benefits package. The plan he chose has a $1,000 deductible and various copays, such as a $20 copay for a doctor’s appointment and a $100 copay for an urgent care visit.
Alex doesn’t have to pay the full cost of services when he goes to see his doctor with symptoms of a cold — he only pays the $20 copay. That $20 does not count toward meeting his plan’s deductible.
When Alex sprains his ankle and heads to a nearby urgent care clinic, he likewise pays a $100 copay for the visit. The care providers at the clinic also x-ray his ankle, and Alex must pay the full cost ($400) for that procedure, as he hasn’t yet met his deductible, and x-rays aren’t considered a routine service that’d be covered by a copay under his plan.
His $100 copay doesn’t count toward his deductible, but the $400 payment for the x-rays does. He’s now that much closer to meeting his deductible and having his plan start to pay.
This is just an example, but it should make the difference between copayments vs. deductibles a bit clearer. The numbers for an actual insurance policy may be different. When reviewing your options during open enrollment, always carefully read the terms, so you know what you’re signing up for.