subject: The Difference between Deductibles and Co-Payments in Health Insurance [print this page] The Difference between Deductibles and Co-Payments in Health Insurance
Understanding the terminology used in health insurance can be a tricky challenge, with the terms co-payment and deductible being especially confusing. These two terms are indeed related, yet there are a number of differences that need to be understood about them if you want to receive better benefits from your health insurance.
Co-payments explained
A co-payment is like a point of service payment that you pay to doctors and other health workers. It is part of your bill payment and something you should take along at when you go to get the service you require. Co-payments will vary according to the kind of service that is received and the kind of insurance a person has.
Deductibles explained
In contrast, deductibles are the amount that you are liable to pay before you can claim for coverage. Again, this amount will vary depending on the kind of insurance a person has, with deductibles usually being worked out on an annual basis. Each year, as an insurance policy is renewed, the amount paid towards deductibles is reset and starts afresh.
Let's look at an example. Say that your deductible is $500. What this means is that before your insurance company pays anything for medical services, you will have to pay $500 by yourself. If you need to have an expensive operation, then the first $500 will be charged to you, and you will need to pay this before the insurance company will cover the rest. Most deductibles are much higher than this amount, often several thousand dollars.
Differences
This is where many people get confused about co-payments and deductibles. In the majority of cases, the insurance provider will cover their share of things like visits to the doctor before the deductible limit is reached. This means that when a new insurance year begins, you are only responsible for co-payments, and not the deductibles.
If you require a major operation however, then you would need to pay the deductible fee before the insurance company will reimburse the remainder of the expenses. Also, co-payments are often not counted by most companies as being part of the deductible expenses you have to pay.
Taking again the example of a new insurance year, it might be that you need to meet a $1,000 deductible, and pay a percentage of the remainder of a service charge as well, which is called a co-payment. If you require an operation costing $26,000, then you will have to pay the first $1,000 out of your own pocket. With the remaining $25,000, you might also owe a percentage of this as well, say 10%. Therefore, the total of your bill would be $1,000, plus $2,500, equaling a total of $3,500.
Some insurance policies also contain a maximum amount that you will need to pay by yourself each year, in order to cover against huge, unforeseen medical expenses. This amount may well be the same as your deductible. Therefore, if you need to stay in the hospital for a lengthy period of time, your insurer will only require you to pay this maximum amount.
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