Copays and How They Work

Common Health Insurance Terminology

Premium– The monthly or bimonthly fee you pay to have health insurance.

CPT codes– A medical code used for billing (a 5 digit number like 97110).

Allowed Amount– The maximum amount your particular health insurance plan will pay for a service.

Deductible– The amount you owe before your insurance begins to pay.

Co-insurance– A percentage of the allowed amount that you pay.

Out of Pocket– The maximum you will ever pay during your benefit period.

Copay– A fixed dollar amount you may pay for a service at the time you receive it. Many times, a copay does not apply towards your deductible. However, it will often apply towards your Out of Pocket Limits.

 

 

Copays and how they work

Sometimes the plan you sign up for will charge you a copay per service rather than a deductible. A copay is a fixed dollar amount that you pay to the provider at the time you receive the service rather than after you receive a bill. Sometimes it will apply towards your deductible; sometimes it won’t. Often it will apply towards your Out of Pocket limits.

Copay Examples (with notes from the previous blog post):

A. In this example, if you have a $25 copay for a particular service, then the provider will charge you $25 at the time of the service. The provider will then send their bill to the insurance company. Insurance Company A will receive the $200 bill from the provider and determine that your allowed amount was $70 for the service. The insurance company will send this information in the form of an Explanation of Benefits (EOB) to both you and the provider along with a check for $45 (the $70 allowed amount minus your $25 copay= $45). The EOB will show that you owe $25 (this is the copay amount that you already paid, not a new amount that you owe). The provider will adjust the $200 bill in their electronic medical records to be $70 according to the insurance’s EOB. The provider will apply the $45 from the insurance company and the $25 copay that you paid and the balance will be zero. If you did not pay your copay at the time of the service, the provider will send you a bill for the copay amount.

B. In this example, if you have a $25 copay for a particular service, then the provider will charge you $25 at the time of the service. The provider will then send their bill to the insurance company. Insurance Company B will receive the $200 bill from the provider and determine that your allowed amount was $130 for the service. The insurance company will send this information in the form of an Explanation of Benefits (EOB) to both you and the provider along with a check for $105 (the $130 allowed amount minus your $25 copay= $105). The EOB will show that you owe $25 (this is the copay amount that you already paid, not a new amount that you owe). The provider will adjust the $200 bill in their electronic medical records to be $130 according to the insurance’s EOB.  The provider will apply the $105 from the insurance company and the $25 copay that you paid and the balance will be zero. If you did not pay your copay at the time of the service, the provider will send you a bill for the copay amount.

 

This copay payment continues until you have reached your Out of Pocket limit (OOP). The OOP is the maximum amount that you will pay during a benefit period. Sometimes the deductible or copays apply to the OOP and sometimes they don’t; it varies per plan.

Out of Pocket Examples (continued from above):

A. In this example, if you have a $25 copay for a particular service, then the provider will charge you $25 at the time of the service. The provider will then send their bill to the insurance company. Insurance Company A will receive the $200 bill from the provider and determine that your allowed amount was $70 for the service. However, you have accumulated enough medical expenses to have met your $4000 Out of Pocket limit (OOP), so now the insurance will pay 100% of the service cost. The insurance will send this information in the form of an Explanation of Benefits (EOB) to both you and the provider along with a check for 100% of $70, which is $70, to the provider. The provider will adjust the $200 bill in their electronic medical records to be $70 according to the insurance’s EOB; they will note the account as paid in full by the insurance by $70. You will not receive a bill. If you paid your $25 copay at the time of service, the provider will issue you a refund.

B. In this example, if you have a $25 copay for a particular service, then the provider will charge you $25 at the time of the service. The provider will then send their bill to the insurance company. Insurance Company B will receive the $200 bill from the provider and determine that your allowed amount was $130 for the service. However, you have accumulated enough medical expenses to have met your $4000 Out of Pocket limit (OOP), so now the insurance will pay 100% of the service cost. The insurance will send this information in the form of an Explanation of Benefits (EOB) to both you and the provider along with a check for 100% of $130, which is $130, to the provider. The provider will adjust the $200 bill in their electronic medical records to be $130 according to the insurance’s EOB; they will note the account as paid in full by the insurance by $130. You will not receive a bill. If you paid your $25 copay at the time of service, the provider will issue you a refund.

Copays and Deductibles together?

There are some insurance companies that will charge a copay for a service, such as a therapy, but also apply the remaining balance of the initial visit to the patient’s deductible. This may be why, even though you pay your copay in full for each visit, you also receive a bill from the provider’s office. It is best to call the office and inquire about the bill so you will know if this is the case or if a billing error has occurred.

 

On to the next topic:  More to learn about what you need to know. Stay tuned for Physical therapy visit limits, authorizations, and benefit periods.

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