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Understanding Copays, Deductibles, Coinsurance, and Out-of-Pocket Maximums

Health Insurance Doesn’t Have to Be Complicated

We know there can be a lot of complicated terms in health insurance. That’s why it’s helpful to know the meaning of commonly used terms such as copay, deductible, and coinsurance.

What is a copay and how does it work?

A copayment, or copay, is a fixed dollar amount you must pay each time you obtain a covered service. After you pay your copay, your health plan pays the rest of the charges billed by the doctor, hospital, or facility.

Example: Your copay to see a primary care doctor is $20. You are required to pay the $20 each time you visit the primary care doctor.

What is a deductible and how does it work?

A deductible is the amount you pay each year for most eligible medical services or medications before your health plan begins to pay its share of the cost of covered services.

Example: If you have a $2,000 yearly deductible, you’ll need to pay the first $2,000 of your total eligible medical costs before your plan begins to pay.

What is coinsurance and how does it work?

Coinsurance is a percentage of charges you pay after your deductible has been met for covered services. Your health plan pays its share of eligible costs that add up to 100 percent.

Example: A covered service with 20 percent coinsurance means you pay 20 percent of the billed charges from the provider, hospital, or facility after you have met your deductible and True Health New Mexico pays the remaining 80 percent of those charges. The higher your coinsurance percentage, the higher your cost-share. You are also responsible for any charges not covered by the health plan, such as charges that exceed the plan’s maximum reimbursable charge.

What is the out-of-pocket maximum and how does it work?

The out-of-pocket maximum amount is the most you could pay for covered medical expenses in one year. This amount includes any money you paid towards your deductible, copays, and/or coinsurance. Once you reach your annual out-of-pocket maximum, your health plan will pay your covered medical services and prescription costs for the rest of the year.