Co-pay vs. Deductible: What’s the Difference?

Co-pays and deductibles are features of health insurance plans. They involve payment on the part of the insured, but the amount and frequency differ for co-pays and deductibles.

What Are Co-pays?

A co-pay, short for co-payment, is a fixed amount that a healthcare beneficiary pays for covered medical services. The remaining balance is covered by the person’s insurance company.

Co-pays typically vary for different services within the same plans, particularly when they involve services that are considered essential or routine and others that are considered less routine or in the domain of a specialist.

Co-pays are typically lower for standard doctor visits than for seeing specialists. Co-pays for emergency room visits tend to be the highest.

What Are Deductibles?

A deductible is a fixed amount that a patient must pay each year before their health insurance benefits begin to cover the costs.

After meeting a deductible, beneficiaries typically pay co-insurance—a certain percentage of costs—for any services covered by the plan. They continue to pay the co-insurance until they meet their out-of-pocket maximum for the year.

Preventive Services

In most cases, preventive services are covered at 100%—meaning that the patient doesn’t owe anything for the appointment. Plans offered through the Patient Protection and Affordable Care Act pay in full for routine checkups and other screenings considered preventive, such as mammograms and colonoscopies for people over a certain age.

Real-Life Example

Consider a health insurance plan with a $30 co-pay to visit a primary care physician, a $50 co-pay to see a specialist, and a $10 co-pay for generic drugs.

Patients pay these fixed amounts for those services regardless of what the services actually cost. The insurance company pays the remaining balance (the “covered amount”). Therefore, if a visit to an endocrinologist (a specialist) costs $250, the covered patient pays $50 and the insurance company pays $200.

Now, consider a policy with a $2,000 annual deductible before insurance starts to pay, and 20% co-insurance after that.

If a patient sprains an ankle and treatment costs $300, that patient would pay the full cost because the deductible has not been met. For additional treatments later that same year costing $500, the patient still pays the full cost.

Yet another hospital visit later the same year comes to $3,500. On this bill, the patient pays $1,200—the balance of the deductible. Once the deductible is met, the patient pays 20% (the co-insurance amount) of the remaining balance. In this case, that would be an additional $460 (20% of $2,300—the difference between the deductible and the hospital visit). The insurance company would cover the remaining $1,840.

The Bottom Line

Co-pays and deductibles are two parts of the health insurance equation. In general, plans that charge lower monthly premiums have higher co-payments and higher deductibles. Plans that charge higher monthly premiums have lower co-payments 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 co-pays and a lower deductible. And, of course, keep an eye on the maximum out-of-pocket limits as well.