Co-payment, or copay, refers to medical fees incurred by an insured patient that would be shared by the patient and the insurer.

The insurance company usually pays the lion’s share of medical expenses, while the patient would have to pay a small portion of maybe 5% – 10% of the medical bill.

This is because the objective of co-insurance and copayment schemes is to deter patients from overusing healthcare facilities and services when there is no necessity to seek treatment.

Making them liable to pay a portion of fees in cash can deter the abuse of claims being made.

The lower the co-payment percentage that a person desires, the higher the insurance premiums expected to pay. And vice-versa.

To reduce the co-pay amount, people can actually sign up for riders to provide more coverage.

Riders that cover 100% of co-payments used to be available. But are no longer available since early 2018.

Why letting insurers pay 100% can be bad

Should insurance companies pay 100% of medical bills, patients can be inclined to seek the best and most expensive treatments for their medical conditions, choose to be accommodated in the most luxurious hotel-like wards, insist on being consulted by the best doctors and surgeons, etc.

Insurers would have to foot the bill as long as the total claims are within the coverage limits and terms.

While this can seem beneficial to consumers, the drawback can be disastrous for a fee-for-service healthcare system.

Hospitals and medical care service providers, might increase their prices to unaffordable levels for the average person. This is because patients have insurers to pay for them without having to worry about payment.

People without insurance would slowly be priced out of medical services.

The increase in healthcare costs would inevitably lead to higher and higher insurance premiums, which would be ultimately paid for by consumers.

Such a cycle of passing healthcare expenses around is unsustainable, and can even lead to social problems.

This is the biggest issue that co-payments is trying to combat.

By making people responsible for part of payment, the likelihood of abuse is much lower.

Copayment vs deductible

The argument against copayment is that most medical insurance policies already have a deductible requirement written into them.

This already requires requires an insured person to fork out cash from his or her own pockets. Co-paying can seem like just another sneaky way insurers get customers to pay more premiums.

It is really up to debate whether it is necessary for both these features to be included into insurance polices.

After all, they both play the same role of deterring the abuse of claims.

However, it must be noted that there are key differences between deductibles and copayments.

The presence of deductibles can make it impossible for one to make claims for small medical expenses. This is because insurance don’t start to pay out until the deductible limits are met.

This somewhat means that insurance would only cover medical treatment, surgery or rehabilitation, etc, for major health issues. Simply because they cost more and would easily exceed the deductibles.

And once this deductible threshold is reached, making patients co-pay the bill discourages them from seeking the most expensive treatments and accommodation just because they know that the insurance company would pay for these expenses.

So deductibles and co-payment are actually parts of a two-pronged approach to deter the abuse of insurance policies and driving up the costs of healthcare in general.

For example, an individual might have an health insurance plan that comes with a $1,000 deductible and 10% copayment. He sprains his wrist which incurred a $600 bill that he has to pay the full cost himself. This wouldn’t be claimable as he has not hit the deductible. He then later sprains his back and incurs a $900 medical bill.

Of that $900 bill, $400 would go into deductible to hit the threshold of $1,000. Of the remaining $500, he would copay 10% which amounts to $50. The rest of the fees consisting of $450 would be paid by the insurer.

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