Question

Define deductibles, copayments, and coinsurance.

Short answer

Deductibles, copayments, and coinsurance are three key terms related to insurance policies. A deductible is an out-of-pocket amount the insured person must pay before the insurance company starts to cover expenses; for example, a \(1,000 deductible requires the insured to pay the first \)1,000 of their healthcare costs. A copayment (or copay) is a fixed amount the insured person pays for each specific service or type of healthcare; for example, a \(30 copay for a doctor's office visit. Coinsurance is a cost-sharing arrangement between the insured person and the insurance company where both parties pay a percentage of the covered expenses after the deductible is met; for example, 20% coinsurance means the insured person pays 20% of the covered expenses and the insurance company pays the remaining 80%.

Step-by-step solution

Deductibles

A deductible is a specific amount of money that an insured person must pay out-of-pocket before the insurance company starts to cover the expenses. For example, if an insurance policy has a \(1,000 deductible, the insured person must pay the first \)1,000 of their healthcare costs before the insurance company begins to pay any portion of the remaining expenses.

Copayments

A copayment (or copay) is a fixed amount that the insured person is required to pay for each specific service or type of healthcare they receive, regardless of the total cost of that service. Copayments are often used in health insurance plans. For example, a health insurance plan might have a \(30 copay for a doctor's office visit, \)15 for a prescription, and $75 for a visit to the emergency room.

Coinsurance

Coinsurance is a cost-sharing arrangement between the insured person and the insurance company, in which both parties pay a percentage of the covered expenses after the deductible is met. Coinsurance is usually expressed as a percentage. For example, if a policy has 20% coinsurance, it means that the insured person pays 20% of the covered expenses, while the insurance company pays the remaining 80%.