 Personal Finance PowerPoint Presentation. Copay and deductible. Prepare to get financially fit by practicing personal finance. Insurance is part of our long-term risk management strategy where we use the adage of measure twice, cut once, putting a formal plan in place, which might include setting our insurance goals, developing a plan to reach them, putting those plans in action, reviewing the result, repeating the process periodically. We're now looking at copays and deductibles. Most of this information can be found at Investopedia, copay versus deductible. What's the difference which you could find online? Take a look at the references, resources, continue your research from there. This is by Greg DeParsio, updated June 26th, 2021. Copay versus deductible. What's the difference? We're continuing on with our discussion of insurance, noting that the health insurance can be a little bit more complex in some ways than other kinds of insurance due to government regulations and just the complexity of the health care system itself. So we're going through some more terminology to better understand, comprehend, wrap our mind around the health insurance decisions. So we got the copays and deductibles are features of health insurance plans. They involve payment on the part of the insured, but the amount and frequency differ. So what are copays? A copay is short for a copayment, fixed amount that a health care beneficiary pays for covered medical services. So the copays are those fixed kind of dollar amounts that you will be paying, which can be useful because I can help you to kind of plan and budget a little bit. The remaining balance is covered by the person's insurance company. So that amount, of course, isn't what the actual cost is. That's the amount that you're gonna be paying, say out of pocket versus the amount covered by the insurance company. Copays typically vary for different services within the same plans, particularly when they involve services that are considered essential or routine. So those essential and routines, they're gonna assign basically the copays for them and others that are considered less routine or in the domain of specialists. Copays are typically lower for standard doctor visits than for seeing specialists. So when you think about what's gonna be the copay for particular things, the standard kind of visit type of things are those things that you would have the copays assigned to when you get into the more specialized areas. You might have the higher copays in that event. Copays for emergency visits tend to be the highest. What are deductibles on the other hand? A deductible is a fixed amount that a patient must pay each year before their health insurance benefits begin to cover the costs. So the deductibles, that traditional kind of term, when we think about other kinds of insurance like property insurance or something like that, if your insurance against your home, you might have some kind of deductible. You have to clear the deductible before the insurance kicks in. And that means that you're kind of insuring against the big event that might happen in that case. So the deductible kind of fits in with the health insurance in a bit more complex of a way, but that's the general idea. After meeting a deductible beneficiaries, typically pay co-insurance a certain percentage of costs for any services covered by the plan. So it's a little bit more complicated as we talked about with the insurance for the medical insurance, because after you go over the deductible, you could still have the co-insurance situation, meaning you're paying a percent after that point. They continue to pay the co-insurance until they meet their out-of-pocket maximum for the year. That's gonna be like the upper limit. So what you would like to be able to have is be able to have enough self-insured money that in the event that you had an emergency that cost you over the maximum amount that you could basically cover that, and then the insurance might kick in above that time, which usually for other kinds of insurance, you might think of as the deductible, but the deductible for health insurance kind of works in conjunction with all these other kind of complex things with the health insurance in a bit more dynamic and complex way. So preventative services. Now we got the special term of preventative services. In some cases, preventative services are covered by 100%, meaning that the patient doesn't owe anything for the appointment. So now, and you can see why the laws and litigation is trying to carve out preventative services because they want the politicians are trying to say, we don't want to disincentivize people from taking the preventative nature or preventative services because we think that that could be beneficial, of course, long-term and obviously it looks good from a political standpoint to try to get the insurance companies to cover the preventative stuff, although it skews everything else in terms of the calculations for the premiums and whatnot. So, but in any case, now we've got the categorization of what is preventative versus non-preventative for like a normal doctor visit kind of thing because if it's preventative, you might not have to pay anything because it's preventative. Plans offered through the patient protection and Affordable Care Act pay in full for routine checkups and other screenings considered preventative, such as mammograms and colonoscopies for people over a certain age. So a real life example, suppose a patient has a health insurance plan with a $30 copay to visit a primary care physician, a $50 copay to see a specialist and a $10 copay for generic drugs. The patient pays these fixed amounts for those services regardless of what the services actually costs. So those are those fixed amounts and they got them categorized out. So you can look it up and say, that's how much I'm gonna pay. That's not how much they cost. That's how much I'm gonna pay because my insurance gives me the copay list here. So the insurance company pays the remaining balance to covered amount. Therefore, if a visit to the patient's endocrinologist, a specialist costs $250, the patient pays $50 and the insurance company pays the $200 because we had said that we're gonna pay the $50 for that kind of visit and it costs whatever, $250. We don't care because the insurance company is paying the rest after that point. Now suppose the same patient has a $2,000 annual deductible before insurance starts to pay and 20% co-insurance after that point. So in March, he sprains his ankle playing basketball. It was a foul, it was a blatant foul. You should have seen it, I can't believe this guy. But in any case, and treatment costs $300, he pays the full cost because he has yet to meet his deductible. In May, he has back problems which cost $500 to treat. Again, he pays the full costs. So now he's paying the full cost of this injury that took place there in August. He breaks his arm playing touch football. It was touch football and the guy tackled me. I mean, what are we doing here? I was at full point. Any case, it broke my arm, whatever. So in the bill for his hospital visit comes to $3,500. On this bill, the patient pays $1,200 the balance of his deductible. So once he meets the deductible, he also pays 20% his co-insurance amount. So after the deductible, you think, well, I'm there at this point. Next time somebody on the sports teams, whatever, if I play soccer next time, someone head butts me or something, I don't have to pay anymore. But no, because you still got the 20% that you have to pay. So in this case, that would be an additional $460, which is the 20% of the $2,300, the difference between the deductible and the hospital visit. So is a co-paid the same as a deductible? No, but the two terms are often confused. It is a little bit confusing, I must say. It's a little bit confusing, but we're figuring it out here. A co-pay is a fee that you pay when you receive healthcare services, such as visiting a doctor or picking up prescriptions. Your health insurance company will pay part of this cost and you will pay the rest. A deductible is a set amount that you must meet for healthcare benefits before your healthcare insurance company starts to pay for your care. Co-pays are typically charged after a deductible has already been met. So you got that deductible traditionally with traditional health insurance. You think, well, if I go over the deductible, that's when the insurance pays the rest, but not really with the health insurance because you got the deductible. And then there's the co-pay after that where you're paying a percent. And then there's the maximum where you would think that's where you might hit and the insurance company goes to 100%. So in most cases though, co-pays are applied immediately. So what is an average deductible? This will depend on your personal circumstances but a high deductible plan is generally regarded as any plan that has deductible of $1,400 or more for an individual or $2,800 or more for family coverage. So you got these terms that we've talked about in the past, a high deductible plan and you can think of the relationship between these terms, these benefits, the deductibles for example and the premiums would act as you would expect to hire the deductible. You would think lower premiums, for example, the amount or costs that you'd be paying for the plan. Plans with lower deductibles will have higher monthly premium costs. Though high deductible plans usually cost you more in out-of-pocket expenses, they can have advantages that offset the cost. Generally high deductible plans qualify for a health savings account, otherwise known as an HSA, which can help you save for and manage health care costs. What does a 100% after deductible mean? You might see this phrase on the paperwork relating to your health insurance and it can be confusing. This means that you will not have to pay copay after you reach your deductible because after that point, your insurance company will pay for all of the health care costs. So in that case, you got the 100% after you hit the deductible, that would be good. So what's the bottom line? Copays and deductibles are two parts of the health insurance equation. In general, plans that charge lower monthly premiums have higher copayments and higher deductibles. Plans that charge higher monthly premiums have lower copayments and lower deductibles. When choosing a plan, consider whether you expect to have a lot of medical bills. If so, then it may make financial sense to buy a more expensive plan with lower copayments and a lower deductible. And of course, keep an eye on the maximum out-of-pocket limits as well.