Differences Between Your Health Insurance Copay and Coinsurance

What's the difference between a copayment and coinsurance? Both copay and coinsurance help health insurance companies save money (and therefore keep your premiums lower) by making you responsible for part of your healthcare bills. Both are forms of cost sharing, meaning that you pay part of the cost of your care and the health insurance company pays part of the cost of your care. The difference between copay and coinsurance is in:

  • How the share of the cost is divvied up between you and your health insurance company, including how often you have to pay.
  • The amount of financial risk each exposes you to.
the difference between copay and coinsurance

Verywell / Laura Porter

How a Copay Works

A copayment (copay) is a set amount you pay whenever you use a particular type of healthcare service. For example, you might have a $40 copay to see a primary care provider and a $20 copay to fill a prescription. As long as you stay in-network and fulfill any prior authorization requirements your plan has, you pay the copay amount, your health insurance company pays the rest of the bill, and that's the end of it. Your copay for that particular service doesn’t change no matter how much the healthcare provider charges, or how much the prescription costs (although more expensive drugs tend to be in higher copay tiers, and the most expensive drugs often have coinsurance instead, which we'll discuss in a minute).

Unlike a deductible, which is a specified amount per individual and/or family to be paid per insurance year, you pay a copay each time you use that type of healthcare service.


If you have a copay of $40 for doctor’s office visits and you see the healthcare provider three times for your sprained ankle, you’ll have to pay $40 each visit, for a total of $120.

How Coinsurance Works

With coinsurance, you pay a percentage of the cost of a healthcare service—usually after you've met your deductible—and you only have to continue paying coinsurance until you've met your plan's maximum out-of-pocket for the year. Your health insurance company pays the rest of the cost. For example, if you have a 20% coinsurance for hospitalization, this means that you pay 20% of the cost of the hospitalization, and your health insurer pays the other 80%.

Since health insurance companies negotiate for discounted rates from their in-network providers, you pay the coinsurance on the discounted rate. For example, if you need an MRI, the MRI facility might have a standard rate of $600. But, since your health insurance company has negotiated a discounted rate of $300, your coinsurance cost would be 20% of the $300 discount rate, or $60.

Charging coinsurance on the full rate rather than the discounted rate is a potential billing error that will cost you more than you should pay. If your plan uses coinsurance, you'll want to make sure that the bill is sent first to your health insurance carrier for any applicable adjustments, and then your portion is billed to you (as opposed to paying your percentage up-front at the time of service).

Pros and Cons of Copay vs. Coinsurance

The advantage of a copay is that there’s no surprise about how much a service will cost you. If your copay is $40 to see the doctor, you know exactly how much you’ll owe before you even make the appointment. On the other hand, if the service actually costs less than the copay, you still have to pay the full copay (this can sometimes be the case for generic prescriptions, which might have a retail cost so low that your health plan's copay for Tier 1 drugs might be higher than the retail cost of the drugs). If you’re seeing your healthcare provider frequently or filling lots of prescriptions, copayments can add up quickly.

Coinsurance is riskier for you since you won’t know exactly how much you’ll owe until the service is performed.

For example, you might get an estimate of $6,000 for your upcoming surgery. Since you have a coinsurance of 20%, your share of cost should be $1,200. But, what if the surgeon encounters an unexpected problem during the surgery and has to fix that, too? Your surgery bill could come out to $10,000 rather than the original $6,000 estimate. Since your coinsurance is 20% of the cost, you now owe $2,000 rather than the $1,200 you had planned for (your health plan's out-of-pocket maximum will cap the amount you have to pay in a given year, so this is not a limitless risk).

It can also be difficult to get an accurate estimate of how much a planned procedure is going to cost, since the details of network-negotiated rates are often proprietary. Even in cases where that's not the case, it can sometimes be difficult or impossible for a hospital or surgeon to provide an accurate estimate before the procedure is completed and they know exactly what had to be done.

Insurance companies like coinsurance because they know you’ll have to shoulder a larger share of the cost for expensive care under a coinsurance arrangement than you would if you were paying a simple copay. They hope it motivates you to make sure you really need that expensive test or procedure since your portion of the cost can be a lot of money, even if it’s only 20% or 30% of the bill.

When Does the Deductible Apply?

Most health insurance plans have a deductible that has to be met before the coinsurance split kicks in. That means you'll pay 100% of the plan's negotiated cost for your medical treatment until you reach the deductible, and then the coinsurance split will apply until you meet your out-of-pocket maximum for the year.


If your plan has a $1,000 deductible and then 80/20 coinsurance, you'll pay the first $1,000 for services that apply to the deductible (which generally does not include any services for which a copay applies), and then you'll start to pay 20% of your subsequent costs, with the insurance company paying 80%. It will continue like that until you meet the out-of-pocket maximum. If and when that happens, the insurance company will start to pay 100% of your covered costs for the rest of the year.

Copays usually apply right from the start, even if you haven't met your deductible yet, since they tend to apply to services that are separate from the deductible. Your plan might have a deductible and coinsurance that applies to inpatient care, but copays that apply to office visits and prescriptions. 

However, there are some plans that are designed so that you have to meet the deductible first, and then you start to have copays for certain services. So your plan might apply all charges (except preventive care, assuming your plan is compliant with the Affordable Care Act) to your deductible, and have you pay them in full until you meet the deductible. At that point, the plan might start to have a $30 copay for office visits. With a plan like that, you'd pay full price for an office visit before you meet the deductible (and the amount you pay would count towards the deductible), but then you'd only pay $30 for an office visit after you meet the deductible, and your insurance company would pay the rest of the cost for that visit.

It's also somewhat common for health plans to impose a separate deductible that applies to prescription drugs. If your plan has a prescription deductible, you'll have to pay the full amount of your health plan's negotiated rate for certain prescriptions until you meet the drug plan deductible. After that, the plan's copay or coinsurance structure will kick in, with the insurer paying a portion of the cost when you fill prescriptions.

There's a lot of variation from one health plan to another, so read the fine print on your plan to understand how your deductible works: How much is it? what counts towards it? Do you get copays for certain services before you meet the deductible? Does your plan start to offer copays after you meet the deductible? These are all questions you'll want to understand before you have to use your coverage.

How a Copay and Coinsurance Are Used Together

You might end up simultaneously paying a copay and coinsurance for different parts of a complex healthcare service. Here’s how this might work: Let’s say you have a $50 copay for doctor visits while you’re in the hospital and a 30% coinsurance for hospitalization. If your healthcare provider visits you four times in the hospital, you would end up owing a $50 copay for each of those visits, a total of $200 in copay charges. You’ll also owe the hospital a 30% coinsurance payment for your share of the hospital bill. It might seem like you’re being asked to pay both a copay and coinsurance for the same hospital stay. But, you’re really paying a copay for the healthcare provider’s services, and coinsurance for the hospital’s services, which are billed separately.

Similarly, if you have an office visit copay, it generally only covers the office visit itself. If your healthcare provider draws blood during the visit and sends it to a lab, you could end up getting a bill for the lab work, separate from the copay you paid to see the practitioner. You might have to pay the full cost of the lab work (if you haven't yet met your deductible) or you might just have to pay a percentage of the cost (i.e., coinsurance) if you have already met your deductible. But either way, this is likely going to be in addition to the copay that you paid for the office visit.

Some health plans have copays that apply in some situations but are waived in others. A common example is copays that apply to emergency room visits but are waived if you end up being admitted to the hospital. Under this type of plan, a visit to the ER that doesn't result in a hospital admission might be a $100 copay. But if the situation is serious enough that you end up being hospitalized, you wouldn't have to pay the $100 copay, but you'd instead have to pay your deductible and coinsurance (for the full hospital visit, including your time in the ER and your time as an admitted patient), up to the out-of-pocket maximum for your plan.

Copays and Coinsurance for Prescription Drugs

The difference between copay and coinsurance can be especially confusing with prescription drug coverage. Most health insurers have a drug formulary that tells you which drugs the health plan covers, and what type of cost-sharing is required. The formulary puts drugs into different price categories, or tiers, and requires a different cost-sharing arrangement for each tier.

For example, the lowest tier might be generic drugs and common, older, cheap drugs. That tier might require a copay of $15 for a 90-day supply of a drug. The second tier might be more expensive brand-name drugs and require a copay of $35 for a 90-day supply. But the top tier (on most health plans, this is either Tier 4 or 5, but some health plans break drugs into as many as six tiers) might be really expensive specialty drugs that cost thousands of dollars per dose.

For this tier, the health plan may abandon the copay cost-sharing it used on the lower tiers and switch to a coinsurance of anywhere from 20% to 50%. The coinsurance on the most expensive-tier drugs allows the insurer to limit its financial risk by shifting a larger share of the cost of the drug back onto you. This can be confusing since most of your prescriptions will require a fixed copay, but the most expensive prescriptions, top-tier drugs, will require a coinsurance percentage rather than a copay.

As noted above, some health plans have separate prescription drug deductibles, and some count all expenses (including prescription drugs) towards the overall plan deductible. In those scenarios, you have to meet the deductible before the health plan starts to pay a portion of your drug costs, although you will get the health plan's negotiated rate for the prescriptions.

If you're facing the possibility of having to pay thousands of dollars per month for specialty drugs, you'll be glad to know that once you've met your plan's out-of-pocket maximum for the year, your health plan will start paying 100% of the cost of the medications for the remainder of the year.

Unless your plan is grandmothered or grandfathered, the out-of-pocket maximum cannot be higher than $8,150 in 2020 (those limits apply to a single person; if more than one person in your family needs medical care, the combined limit is twice as high).

A Word From Verywell

Coinsurance vs. copay can be confusing, but understanding the difference between copay and coinsurance means you're better equipped to choose a health plan that meets your expectations, budget for medical expenses, and catch errors in your medical bills.

1 Source
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  1. Healthcare.gov. Out-of-pocket maximum/limit.

Additional Reading

By Elizabeth Davis, RN
Elizabeth Davis, RN, is a health insurance expert and patient liaison. She's held board certifications in emergency nursing and infusion nursing.