Question

Define deductibles, copayments, and coinsurance.

Short answer

Deductibles, copayments, and coinsurance are three terms related to health insurance. Deductibles refer to the annual amount an insured person must pay out-of-pocket before the policy begins to cover medical services; for example, if a policy has a $1,000 deductible, the insured person pays the first $1,000 in medical expenses. Copayments, or copays, are fixed amounts the insured person pays for a specific medical service; for example, a $20 copay for a doctor's visit. Coinsurance is a percentage of the total cost of a medical service that the insured person is responsible for paying after meeting their deductible; for instance, if someone has a 20% coinsurance rate, they pay 20% of the total cost and the insurance company covers the remaining 80%.

Step-by-step solution

Deductibles

A deductible is a specific amount of money an insured person must pay out-of-pocket before the health insurance policy begins to cover medical services. Deductibles are paid on an annual basis and reset every year. For example, if a health insurance policy has a \(1,000 deductible, the insured person needs to pay the first \)1,000 in medical expenses before the insurance company starts to cover any costs.

Copayments

A copayment, or copay, is a fixed amount the insured person is required to pay for a specific medical service or prescription, regardless of the total cost of that service. The insurance company then covers the remaining costs. Copayments are meant to share the cost of healthcare between the insured person and the insurance provider. For example, an insured person might be required to pay a $20 copay for a doctor's visit, regardless of the total cost of the visit.

Coinsurance

Coinsurance is similar to copayments, but instead of being a fixed amount, it's typically a percentage of the total cost of a medical service or prescription that the insured person is responsible for paying. Coinsurance comes into effect after the deductible has been met during the year. For instance, if an individual has a 20% coinsurance rate, they will be responsible to pay 20% of the total cost of a medical service, and the remaining 80% will be covered by the insurance company.