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  3. Difference between Copay, Coinsurance and Deductible
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What is Copay, Coinsurance and Deductible in Health Insurance?

When it comes to availing health insurance, you should be clear on certain terms, like copay, deductible, and coinsurance. These might seem overwhelming if you're not familiar with them. 

But don’t worry—we’re here to help!

Basically, copayments are fixed amounts you pay for specific services, deductibles are the total amount you need to spend before your insurance kicks in, and coinsurance is the percentage of costs you share after meeting your deductible.

In this article, we’ll break down how these cost-sharing expenses impact your health insurance policy and what are the key differences between copay, deductible and coinsurance. 

Ready to get a clearer picture? Keep reading to learn more about each term and how they fit into your health insurance plan!

Table of Contents

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Key Differences Between Copay, Deductible, and Coinsurance

All three cost-sharing options can be summed up in the table provided below:

Suppose a person has a health insurance policy of ₹5 Lakh. with a 10% copay on it and ₹5000 deductibles.

With the deductible, he further has a 10% coinsurance clause. If the treatment for a certain disease costs ₹10,000, his liabilities from these clauses will be:

Feature Copay Deductible Coinsurance
Definition Co-Payment is a cost sharing requirement under a health insurance policy that provides that the policyholder/insured will bear a specified percentage of the admissible claims amount. A deductible in health insurance is the amount of money you need to pay yourself before your health insurance starts covering costs. You need to cover these costs first before the insurance company will start paying for your expenses. The percentage of the total medical costs you share with the insurer after the deductible is met.
Payment Timing Paid at the time of receiving the service. Paid before the insurer begins to pay for covered expenses. Paid after the deductible is met, as a percentage of the total medical expenses.
Amount Fixed amount or percentage (e.g., 10% of the bill or ₹500 per visit). Varies by plan (e.g., ₹10,000 per year). Percentage of the remaining costs (e.g., 20% of the total bill).
Coverage Impact Directly reduces the insurer’s payment for each claim. The amount you pay first before the insurer starts covering costs. Applies after the deductible is met, affecting the portion of the bill you pay.
Example 10% of the treatment cost. Let’s say the treatment cost amounts up to ₹10,000. Thus, during treatment the policyholder will have to bear ₹1000 of the treatment expenses and the rest ₹9000 will be covered by the insurance policy. Here, the deductible is ₹5000, which the policyholder has to first pay towards his treatment. The policy will start contributing only after the policyholder has paid his/her share of ₹5000. Coinsurance is often levied on policies after the deductible has been paid. If the treatment cost is ₹10,000 and the deductible of ₹5000 has been paid, the policy will cover the rest ₹5000. Out of this ₹5000, the policyholder will have to pay 10% of ₹5000 i.e. ₹500 under the coinsurance clause. The rest ₹4500 will be covered by the insurance policy.

What is Copay in Medical Billing?

Copay refers to when policyholders have to bear a fixed part of their expenses towards medical treatment while the rest is borne by the insurer. This can either be as a fixed amount or a fixed percentage of the treatment costs.

An Example of How Copay Works in Health Insurance

If your insurance policy comes with a copay clause of ₹2000 of your treatment expenses and the treatment costs you ₹10,000, you will be required to pay ₹2000 towards your treatment, while the rest of ₹8000 will be covered by the insurer.

Again, if the copay clause requires you to cover 10% of the total cost incurred, you will be required to pay ₹1000 towards it, while the rest 90% (₹9000) will be paid by the insurer.

Digit Insurance provides health insurance policies with 0% copayment and covers the entire treatment costs incurred by an individual.

What are Deductibles in Medical Billing?

A deductible is a fixed sum of money that policyholders are required to pay before their insurance policy starts contributing to their medical treatment. The term for paying deductibles is decided by the insurance provider - whether it is per year or per treatment.

An Example of How Deductible Works in Health Insurance

If your policy mandates a deductible of ₹5000, you will be required to pay for your treatment expenditures amounting up to ₹5000, after which your insurance policy will kick in.

What is Coinsurance in Medical Billing?

Coinsurance refers to the percentage of treatment costs that you have to bear after paying the deductibles. This amount is generally offered as a fixed percentage. It is similar to the copayment provision under health insurance.

An Example of How Coinsurance Works in Health Insurance

If your coinsurance is 20%, then you will be liable to bear 20% of the treatment cost, while the rest 80% will be borne by your insurance provider.

That is, if your expenses towards treating a certain disease are ₹10,000, you will be required to pay ₹2000 while ₹8000 will be covered by your insurance policy. This amount is generally calculated after you have paid your deductibles.

Now that we have explained what each of these terms means for your health insurance policy let us take a look at the differences between each of these.

What is an Out-of-Pocket Maximum Expense?

The "Out-of-Pocket Maximum Expense" refers to the maximum limit of expenses you will incur for covered medical services during a policy year. Once you reach this limit, the insurance company will cover all additional costs for covered services for the rest of that policy year. 

This limit includes all out-of-pocket costs like deductibles, copayments, and coinsurance, but typically does not include premiums or non-covered services.

Copay vs Deductible in Health Insurance

The difference between copay and deductible clauses can be illustrated in the table below:

Parameter Copay Deductible
Applicability Copay is the fixed portion that policyholders have to pay towards their treatment expenses, while the rest is borne by insurance providers. It can be given as a fixed amount or a fixed percentage of the treatment expense. A deductible is the fixed amount that policyholders have to bear before their insurance policies start contributing and cover the larger portion of their medical bill.
Effect on premium With a larger copay amount, policyholders are liable to pay lesser premiums. Deductibles also allow policyholders to pay smaller premium amounts.
Coinsurance clause Copay is often used interchangeably with coinsurance. Policyholders often have to pay the coinsurance after meeting the deductible part of their policy.
Implementation The copay clause is levied only on specific healthcare services. A deductible is implemented before the insurance policy starts contributing to an individual’s treatment expenses.

Copay vs Coinsurance in Health Insurance

Even though these are sometimes used alternatively, copay and coinsurance have certain minute differences. To learn what is coinsurance vs copay, let us take a look at the table below:

Parameter Copay Coinsurance
Applicability It is a pre-determined fixed portion that you have to pay towards the expenses incurred in due course of medical treatment. It can either be given as a fixed amount or a fixed percentage of the treatment expenses. The actual amount for coinsurance varies. But, the percentage of expenses you need to bear towards your treatment remains fixed as per the coinsurance clause.
Payment process With the copay clause, you need to make a portion of payments each time you seek any medical service. Coinsurance needs to be paid for the medical services after you have covered your deductible.
Time of payment Under the copay clause, you need to bear the expense at the time of seeking service. The amount you pay towards your treatment is billed by your insurance provider, and you are required to pay directly to them.
Effect on deductibles Copay count towards deductibles only under certain circumstances. Coinsurance is paid only after meeting deductibles.

Coinsurance vs Deductible in Health Insurance

Now that you have learnt the differences between copay and deductible and that between copay and coinsurance, it will be easy enough to differentiate between coinsurance and deductible. Some of them are as follows:

Parameter Coinsurance Deductible
Applicability It is a fixed percentage of expenses incurred towards treating a disease that policyholders have to bear while the rest is covered by their insurance provider. Deductible refers to the fixed amount that insurance holders have to pay to cover medical treatment expenses before their insurance policy starts contributing.
Payment limitation Coinsurance is paid every time you raise a claim against your insurance policy. The payment towards deductibles for one year ends after you have paid the stipulated amount. You will again be required to pay the deductible next year.
Payment amount variability The amount paid towards coinsurance varies according to the expenses borne towards treatment. The amount for deductible remains fixed.
Risk factor As far as liabilities are considered, coinsurance bears more risk because you will have to bear a particular percentage of the treatment expenses. This can be a substantial amount if the cost for treatment is high. Deductibles do not pose as a liability because the amount to be paid is fixed, even if the treatment costs are substantial.

So, now that we have learned at length about what is copay, coinsurance and the deductible and their differences, it will be easier to seek out health insurance policies with the maximum benefits.

Know more about:

Benefits of Copay in Health Insurance

The features of copayment under insurance policies can be listed as follows:

  • With the copay clause, insurance providers bear the majority of the claim while the policyholder is required to cover a certain fixed part.
  • The copay amount is fixed according to the medical service availed.
  • A lower copayment amount means higher premium payment.
  • These clauses are levied mostly on health insurance policies for senior citizens.
  • These are more popular in metropolitan cities where the cost of treatment is higher.
  • It provides predictable out-of-pocket costs for medical services, making it easier for policyholders to budget for healthcare expenses.

No copayment means that the entire sum of treatment expense incurred is borne by the insurance provider.

Benefits of Coinsurance in Health Insurance

Following are a few features of coinsurance plans:

  • It helps to protect insurers against large claims.
  • Policyholders are required to pay their deductible amount before their coinsurance plan comes into play.
  • The percentage of coinsurance remains fixed.
  • This percentage adheres to the out-of-pocket maximum that you can pay for a year before your insurance policy pays the rest of it.
  • It promotes more thoughtful use of healthcare services by discouraging overuse of services..
  • Coinsurance balances financial responsibility between the insurer and policyholder

Benefits of Deductibles in Health Insurance

Following are a few features of coinsurance plans:

  • It helps to protect insurers against large claims.
  • Policyholders are required to pay their deductible amount before their coinsurance plan comes into play.
  • The percentage of coinsurance remains fixed.
  • This percentage adheres to the out-of-pocket maximum that you can pay for a year before your insurance policy pays the rest of it.
  • It promotes more thoughtful use of healthcare services by discouraging overuse of services..
  • Coinsurance balances financial responsibility between the insurer and policyholder.

What is Copayment with Deductible in Health Insurance?

While copay, deductible and coinsurance are cost-sharing terms, their applicability can make a huge difference to your overall health insurance plan.

Deductibles and coinsurance are clauses that are mostly implemented together under one single insurance plan. But, a few insurance plans also implement copayment and deductible clauses simultaneously. 

If your health insurance plan does the same, here is what it will mean for you – 

  • You will have to pay a fixed amount towards your treatment plans. Your insurance plan will start contributing towards your treatment only after the deductible amount you have paid has been exhausted.
  • Once the insurance plan kicks in, you will be required to pay a fixed sum of money every time you raise claims against the policy. The insurance plan will cover the amount outstanding after you have paid your copayment amount.
  • You will have to pay smaller premiums towards the policy, making it cheaper to avail.

Should You Opt for a Health Insurance Plan with Copayment, Coinsurance and Deductible Clauses?

Yes, opting for a health insurance plan with copayment, coinsurance, and deductible clauses can be beneficial, but it comes with trade-offs. 

While these plans generally have lower monthly premiums, meaning you pay less each month, you will need to cover a portion of your medical expenses out-of-pocket when you need care. This can be challenging if you don’t have extra cash available at the time of a medical emergency.

If you prefer a more predictable approach to healthcare costs, you might want to look at plans without these cost-sharing features. These plans usually have higher premiums but cover more of your medical expenses directly. 

With numerous health insurance options available in India, you can find a plan that fits your needs. Always review the details of each policy carefully to ensure it meets your requirements and budget effectively.

How to Choose the Right Health Insurance Plan?

Choosing the right health insurance plan involves evaluating how copay, coinsurance, and deductible will impact your out-of-pocket costs. Here’s a guide to help you make an informed decision:

  • Assess Your Health Needs: If you frequently visit doctors or specialists, a plan with a lower copay might be advantageous. Consider if you anticipate any major treatments or surgeries that could affect your deductible and coinsurance costs.
  • Compare Deductibles: Plans with lower monthly payments usually mean you'll pay more out-of-pocket before insurance kicks in. They're a good choice if you anticipate low medical expenses. On the other hand, plans with higher monthly payments often have lower out-of-pocket costs when you need medical care, making them a better option if you foresee needing frequent or extensive medical treatment. So it’s important to compare deductibles.
  • Evaluate Copayments: You pay a smaller fixed amount for each visit, which can be beneficial if you visit healthcare providers often. Might save on premiums but can add up if you need frequent medical services.
  • Consider Coinsurance Rates: You’ll pay a smaller percentage of the costs for covered services, which can reduce your expenses if you need significant care. You’ll pay a larger percentage of your medical bills, which could be costly if you require extensive medical care.
  • Estimate Your Total Costs: Add the deductible, copayments, and coinsurance you might expect based on your health needs. This will help you estimate your total out-of-pocket costs under different plans. Ensure that the out-of-pocket maximum is reasonable and provides financial protection if you face high medical costs.
  • Balance Premiums and Out-of-Pocket Costs: Weigh the monthly premium against the out-of-pocket expenses (deductible, copay, and coinsurance). A plan with lower premiums might have higher out-of-pocket costs, so find a balance that suits your financial situation and healthcare needs.

By carefully considering how each plan's copay, coinsurance, and deductible align with your anticipated healthcare needs and budget, you can choose a health insurance plan that offers the best value and financial protection for you.

Should You Opt for a Health Insurance Plan with Copayment, Coinsurance and Deductible Clauses?

Well, even though on paper your premium payment will be reduced if you opt for a policy with such cost-sharing terms but your liability towards the policy will increase. You will have to take care of a portion of the expenses every time a medical emergency arises. This can lead to difficulties if you do not have readily available cash in hand.

It is, thus, more beneficial to avail a health insurance plan that does not impose such cost-sharing terms. With the plethora of health insurance policies provided by insurance companies in India, you can easily find a policy that can suit your requirements effectively.

Make sure to check all the terms and conditions put forth under each policy to avail the one best-suited to your requirements!

FAQs about Coinsurance vs Copay vs Deductible