The short answer: the deductible is what you pay before the plan starts sharing costs. A copay is a set amount you pay for a visit or a prescription. Coinsurance is your share of a bill once the plan is sharing costs. For covered, in-network care, all three count toward your out-of-pocket maximum, and once you reach it, the plan pays for covered care for the rest of that year.
The three words, one at a time
- Deductible. What you pay before the plan starts sharing costs. Think of it as the first stretch of the year that is mostly yours.
- Copay. The set amount you pay for a visit or a prescription. You know the number before you walk in.
- Coinsurance. Your share of a bill once the plan is sharing costs. The plan pays part, you pay part.
None of these is your premium. The premium is what you pay every month, whether you use the plan or not. It is a separate bill, and it does not count toward any of the three.
The order they usually apply in
Picture a year on a typical major medical plan as a path with a few stages.
- First, the deductible. Early in the year, before the plan starts sharing costs, most of a covered bill is yours.
- Then, coinsurance. Once the deductible is met, the plan starts sharing costs. You pay your share of each bill, and the plan pays the rest.
- Last, the out-of-pocket maximum. Once your deductible, copays and coinsurance for covered, in-network care add up to the maximum, the plan pays for covered care for the rest of that year.
Where copays fit in
Copays are the part that depends most on the plan design. On some plans, doctor visits are on a copay from day one: you pay the set amount for each visit from the start. On other plans, everyday visits, urgent care and prescriptions are paid at coinsurance after the deductible instead of a flat copay.
Neither design is wrong. A plan with copay-based visits can feel easier if you see a doctor often. A plan that trades flat copays for a lower monthly price can make sense if you rarely go. The point is to know which one you are buying, so ask: "Are office visits a copay, or do they go toward the deductible?"
How they all connect to the out-of-pocket maximum
The out-of-pocket maximum is the most you pay for covered care in a plan year. Your deductible, copays and coinsurance for covered, in-network care all count toward it. Two things usually do not: your monthly premium, and care the plan does not cover. That is why the hard-year number is twelve months of premium plus the out-of-pocket maximum. More on the out-of-pocket maximum.
One more thing to check: when the counting starts over. A calendar-year deductible resets every January 1, no matter when you enrolled. A plan-year deductible resets on your enrollment anniversary. On some plans the out-of-pocket maximum resets on the same rule as the deductible. When does my deductible reset?
Picture it
You pick a plan because the monthly price is low and the summary says it has copays. In the spring you see your doctor and are surprised by the bill: on this plan, office visits go toward the deductible, not a copay. Then a knee injury needs imaging and therapy. You pay the deductible, then coinsurance on every visit after that, and you have no idea where it ends.
Now picture the other version. Before you enrolled, someone walked you through the three words on each plan you were looking at. You knew which plan put visits on a copay from day one, what your share would be once the plan started sharing costs, and the out-of-pocket maximum where it all stops. The knee injury is still a hard few months, but every bill lands where you expected it to.
Using them to compare plans
Do not compare plans on the monthly price alone. Add twelve months of premium to what you are likely to pay when you use care: the deductible, your copays and coinsurance. Then look at the out-of-pocket maximum for the hard year. How to compare plans by the real yearly cost.
Also check that you are looking at major medical. A limited medical plan pays set amounts up to a cap, rather than covering everything above a deductible, so the rest of a large bill can be yours. How to tell the difference.
On the Marketplace, Bronze and Silver deductibles can be several thousand dollars. Private plans offer options with lower deductibles, copay-based visits or first-day benefits, and for a healthy applicant who gets little or no subsidy, a private plan's full price is often lower. See ACA and private plans side by side.
This is general education, not tax advice and not a guarantee of coverage or savings. How a deductible, copays and coinsurance work depends on the plan, the carrier and your state, so check the plan summary.