Copay
A copay is the fixed amount (e.g., $20) a person pays for a covered healthcare service, generally at the time service is rendered.
What is a copay?
A copay, or copayment, is the amount the covered participant pays out of pocket after a doctor’s visit or when buying prescription medicine. Copays are not a fixed amount and may vary from one plan to another. It’s also important to note that emergency room visits may cost more than routine doctor visits.
Copays are generally considered nominal payments commonly found as part of a health plan. They are an added benefit for more regular services, such as:
- Primary care doctor visits
- Specialist visits
- Prescriptions
- Emergency coverage
Copays may also be used for in-network services but rarely for out-of-network services. Services outside of those covered by the standard health plan (e.g., dental or vision services) are usually ineligible for using a copay.
In most situations, the deductible does not need to be met before paying the copay (except if your plan is a High Deductible Health Plan). You should review the plan Summary of Benefits and Coverage (SBC) to confirm that the deductible is waived for the service you seek.
Why is understanding copays important to my business?
Copays are one way to provide a desirable health plan benefit to your employees. At the same time, your company experiences a savings benefit over a 100% coverage plan. Granted, health plans requiring participants to meet a high deductible are less expensive to your company. Still, they’re much less desirable for many employees — particularly those with children or who are aging.
Depending on your business model and how employees access their healthcare, even lower copays may create a barrier for some of your employees to seek or receive healthcare services.
What is the history of copays?
Copays are a means of plan participants sharing the cost of medical care with the insurance provider.
In 1929, a few Dallas-based teachers, along with a local hospital, proposed that prospective patients could prepay a fixed rate to receive a predetermined number of sick and hospital days. This concept became very popular, particularly during the difficult economic conditions of the Great Depression.
The development of a healthcare cost-sharing program evolved from this original prepaid concept. Referred to as the Baylor Plan, these arrangements set not-for-profit subscription fees to ensure families and communities could continue to receive needed care.
In response to pressure from unions in the 1940s and 50s, employers who were competing for talent during World War II began offering employer-sponsored healthcare. Mandated war-time wage controls gave employers another means to compete for workers.
Summary
A copay is a set dollar amount a healthcare plan participant must pay out of their own pocket. This applies when the patient receives care at a:
- Physician’s appointment
- Visit to a specialist’s office
- Trip to urgent care
- Pharmacy to fill prescriptions
Defining what the healthcare plan considers an in-network system determines whether treatment is eligible for copayment.
