UPDATED: Mar 13, 2020
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Copayment (sometimes abbreviated to copay in insurance documentation) is a payment that is usually laid out in a health insurance policy. This copayment will be made by the insured party every time an individual accesses health care.
In legal terms copayment is similar to coinsurance (where both parties – the insurer and the policy holder – assume some level of risk on the insured property) but it is specifically defined for health insurance. The copayment must be paid prior to the insured party receiving any benefits from the insurance company.
The copayment won’t generally contribute to any of the out of pocket maximums defined under a policy, where a coinsurance payment will.
Why do insurers require a copayment?
The reasoning behind the requirements for a copayment are simple, they are to encourage the policy holder to act responsibly prior to accessing medical care. If the insurer bears all the financial risk there is no incentive for policy holders to withhold from accessing medical care every time they have a minor complaint, for example; the common cold. A cold is easily treated at home with no need to visit a medical professional (at least in the majority of cases). The copay is there to ensure that people access medical care when they need it, rather than indiscriminately.
What is my level of copay on my health insurance policy?
This varies from policy to policy and you should check your insurance contract to discover what your copayments are set at. Ideally for the best value you should have a copay that is high enough to discourage you from accessing medical care needlessly but not so high that you cannot afford to pay it at all (this would effectively render you uninsured as the insurance policy cannot pay benefits until after you have made the copayment).
How does copayment affect the payments for prescription drugs?
Some insurance policies will specify a copay percentage for prescription drugs, rather than a fixed price for the copay. In this instance it is common to find that the copay percentage is higher for brand name pharmaceutical products than for generic compounds.
Additional Copayment Definitions
This means that in the majority of treatment cases it is better to opt for a generic drug than a brand name alternative, as they will have the same effect on the individual. However in some cases there are no generic alternatives to brand names – particularly if they are still being manufactured during their patent period.