Understanding Health Insurance Terminology: Copays, Coinsurance, Deductibles, and Out-of-Pocket Maximums

All industries create their own jargon. While brewers, vintners, distillers, and distributors might have a firm grasp on beverage lingo, it’s understandable that they might feel stymied when faced with health insurance terminology. 

If you’ve ever received a statement from your insurance company and wondered what the heck some of the line items referred to, this blog post is for you.

What is a Deductible?

Most health insurance plans include a deductible, which is the predetermined amount you pay out of pocket each year before your health insurance begins to cover some of your healthcare costs. Exceptions typically include preventive services like routine annual physicals and immunizations, which are not subject to the deductible. Insurance covers the cost of these services, even if you haven’t met your deductible yet. Keep in mind your deductible contribution resets (starts again at zero) each year on January 1st.

Here’s an example: If your plan’s deductible is $2,500, you’ll pay 100 percent of eligible health care expenses until all your medical bills during the year total $2,500. After that, your plan will pay for part of the costs until the end of the year. 

What is Coinsurance?

Coinsurance is the percentage of the cost of healthcare services that you are expected to pay, with your insurance provider paying the rest. It’s usually figured as a percentage of the amount the insurance plan allows a provider to charge for a given service, rather than a percentage of what you would be charged without insurance coverage. You start paying coinsurance after you’ve met your plan’s annual deductible.

Example: You’ve paid $2,500 in health care expenses so far this year, meeting your deductible. The next time you go to the doctor (before the end of the year), you and your plan share the cost rather than you paying all costs. If you have an “80/20 plan,” your insurance company will pay 80 percent and you’ll pay 20 percent of the insurance-company approved charge for that service. 

What is a Copay?

A copay is a fixed amount you pay for a service, usually at the time you receive the service. Typically when you arrive for a doctor’s appointment, you will be asked to pay the copay on the spot, and the office will bill your insurance company to determine how to cover the rest of the cost. The copay amount is set by the insurance company and may vary by the type of service (e.g., an appointment with a specialist and a visit to the emergency room may have different copays). You will typically pay a copay whether or not you’ve met your deductible.

What are Out of Pocket Maximums

Out of pocket expenses include what you pay for healthcare services that are covered by your insurance. These are expenses that you pay yourself, without any reimbursement from your insurance provider, and include deductible, coinsurance, and copay payments. Most insurance plans have an out-of-pocket maximum for each year. If your plan’s maximum is $10,000 in one calendar year, once you’ve spent that much on healthcare expenses, your insurance will pay all additional costs with no more copays or coinsurance required.

Insurance Answers are a Phone Call Away

The friendly, knowledgeable experts at the Michigan Beverage Collective can answer all your questions about healthcare insurance and the jargon that goes along with it. Contact us to find out how we help Michigan beverage company owners save money and relieve administration headaches.