What is a copayment in terms of health insurance?

A copayment, commonly referred to as a copay, is a predetermined, flat dollar amount that an insured individual is required to pay directly at the time of receiving a healthcare service. This amount varies based on the type of service received, such as a doctor’s visit or a specialist consultation. For instance, a health insurance plan may have a copayment of $20 for primary care visits and a different amount for specialist visits. The purpose of a copay is to share costs between the insurance provider and the insured, thereby reducing the total expense the insurance company would otherwise cover.

In contrast to other terms, a copayment is not a percentage of the medical bill, which would relate more to coinsurance. It also should not be confused with terms like the total annual deductible, which is the amount an insured must pay out-of-pocket before the insurance company starts to pay for covered services, or the total annual premium payment, which is the amount paid periodically to maintain the health insurance policy itself. Understanding copayments is essential for navigating health insurance plans, as they are a common feature in many health insurance policies, helping patients manage their healthcare costs effectively.