I had always treated these terms as equivalent in my mind, but in some recent threads, posters are referring to them as being different in nature.
What’s the difference between the two?
The details may vary from one policy to another, but the general idea is:
[ul]
[li] Deductible: You pay for 100% of your medical bills out of your own pocket, up to a certain amount. (ETA: That amount is called the deductible.) After you’ve spent that much, your insurance pays some portion (commonly, 80% while you continue to pay 20%).[/li][li] Co-pay: You pay a certain (often relatively small) specified amount for every medical encounter, procedure, or prescription, right from the start. (ETA: The amount is not the same for every medical event as for every other medical event. Policies typically include a multi-page list of every imaginable medical event, showing the co-pay for each. Thus, for example, I pay $15 every time I see a doctor, but maybe $25 every time they do a blood test, and maybe $100 dollars for every day I am an in-patient in a hospital up to a certain number of days, etc.)[/li][/ul]
It should be added, I suppose, that the 80% payment by insurance (after you’ve paid your deductible out of your own pocket) isn’t even where the biggest savings (for the insured patient) seem to come from.
The bigger portion of the savings comes from the contracts that insurance companies have with doctors, hospitals, laboratories, and other providers, which specify the prices that those providers may charge for each of their services.
A service, like a chest X-ray, might cost $500 full retail price for an uninsured patient who is paying out of his own pocket. But a contracted insurance provider may only be allowed to charge $75 for the same service. That is a massive mark-down, and this is where the lion’s-share of savings come from. Then, after you get billed $75 for the X-ray, you pay 100% of that (if you haven’t spent your deductible yet), or 20% if you have (with the insurance paying 80% of the $75). Or, if you have a co-pay system, you may simply pay, say, $30, period, with your insurance paying the rest of the $75.
I belong of a major HMO, and pay a co-pay for each “event”, and I don’t get a bill showing the breakdown of costs because all my medical treatment is done “in-house” by the HMO’s own providers. Years ago, however, I was in a different system, where the providers actually sent a bill.
Every such bill showed the “full” price, and the “discount” that I got by being covered by that contract. The mark-down from the “full” price to the “discounted” price was invariably astonishing. And then on top of that, the insurance company paid the major portion of that “discounted” price, but my saving there was always peanuts compared to that discount in the first place.
BTW, an “HMO” is a Health Management Organization. (Over)simply stated, it’s a system where the organization has its own facilities and — as Senegoid says — employs its own staff.
One other major flavor (Senegoid’s “different system”) is a Preferred Provider Organization, or PPO. Under a PPO, the provider is an independent entity under contract to the insurance company to accept the fee schedule. I have a PPO plan, and unlike an HMO, I can go to any provider; but if I choose an “out of network” provider (one which hasn’t accepted the fee schedule), then all bets are off. I will get a discount, but nowhere near the same break as an in-network provider.
Another aspect of most PPO plans is the annual out of pocket maximum, or OOP. Simply put, the insurer pays nothing until I’ve met the deductible. Once the deductible is met, they pay 80% until my share hits the OOP, after which they foot the entire bill. The deductible and OOP vary by plan, but an example might be $1000 deductible and $5000 OOP.
Then there are “high-deductible” or “catastrophic care” plans, where the insured might be responsible for everything up to $10,000 per year (not a hard target to hit if you have a major event). The main benefits to these is that they’re (relatively) inexpensive, and the insured gets the insurer’s fee schedule.
Sometimes- there are some HMOs that have a network of independent providers and facilities which have contracts with the HMO (like a PPO) , but the HMO pays nothing if you go to an out of network provider/facility
Note that the savings aren’t nearly as great as that makes it seem. The “full” price is pretty much an artifact – almost no one pays it, not even the uninsured who usually work out some kind of deal. The “full price” is large so the insurance companies can present that they’re getting such a great 90+%-off deal for their clients.
There was often also a maximum lifetime benefit on many plans- say $1,000,000. Not exactly sure how that works with Obamacare.
So let’s say you’re on a 80/20 plan with a $500 deductible, $10,000 OOP limit and $1,000,000 lifetime maximum- here’s how it might work:
Your insurance company negotiates the prices they’ll pay providers ahead of time.
So you go to your doctor for an office visit. That office visit may be $200 retail, but is $100 at the negotiated rate, so that’s what you pay.
Payment for trip to Dr.: $100
Deductible: 400
OOP total: 100
Lifetime max: 999,900
You go 4 more times for visits at the $100 rate during the year. As of the last of those four, here’s where things stand:
Payment for trip to Dr.: $100
Deductible: 0
OOP total: 500
Lifetime Max: 999,500
You go in again, but this time it’s a office visit and some sort of diagnostic procedure costing $1000 retail, but $350 negotiated.
Since your deductible has been met, you’re now paying at 80/20.
Payment for trip to Dr: $20 (20% of office visit) + 70 (20% of diagnostic procedure) = $90
Deductible: 0
OOP total: 590
Lifetime Max: 999,430
Let’s say they find a big-ass tumor. You go to the hospital. Everything continues along the same path until your OOP total hits $10,000, at which point the insurance covers everything at 100% until that total hits $1,000,000, at which point they stop paying.
So ultimately it’s not great if you don’t get sick often, but if you get moderately or severely sick, it’s a great deal… up to the point when the lifetime maximum is reached, at which point it sucks, because you’re on the hook again for 100% of retail cost.
The ACA removes lifetime limits from all plans,and yearly limits for plan years starting after 1/1/2014 (except for “grandfathered” plans - and you’ll get a letter if you have one of those).
I think all that might be a little complicated for some.
Deductible: a sum you must pay in full before the insurance company has any obligation to pay for the service at any level.
Copay: A sum you pay directly to the doctor, etc., alongside what the insurance company pays, after coverage is triggered.
So for example.
My prescription plan has a $50 deductible, and then I pay a 5% copay on generics. So that means I pay the first $50 of prescription costs myself, before any obligation to cover prescriptions is triggered, and 5% once it is triggered. My birth control is a good example, as it is generic and I buy it every month. the first and second pack cost $23, the full negotiated price. the third pack costs about $4, the remainder of the $50 deductible. The fourth pack, and every pack thereafter for the year, costs me about $1.15, which is the 5% copay.
Clear as mud, right?
I’ve also noticed this and often wondered why this doesn’t violate the price discrimination clauses of the anti-trust act. With the service side I can somewhat understand that each treatment is a unique service and therefore justifies unique pricing. On the other hand, how do they justify $10 per aspirin for uninsured patient, $3 for insurance company A and 10 cents for insurance company B?
Under my old plan co-pays and deductibles were not the same. You had a $25 co-pay for a medical visit (chiropractor, general practitioner, specialist, physical therapist, etc) and that applied even if you hit your deductible.
I got hte impression once you hit your out of pocket max you didn’t have copays. I never spent that much though.
Co-pays, deductibles and out of pocket maximums are not the same. Generically it seems you have copays and deductibles until you hit our out of pocket max, then you pay nothing.
It works both ways. Sometimes copays count towards the out-of-pocket max, and sometimes they don’t, with the latter being slightly more common. Often a group wants copays for drugs, for medical services only deductibles and coinsurance.
There are a few, but not many, policies where the deductible does not accumulate towards the OOP max, just coinsurance and sometimes copays.
See how simple and straightforward it all is, Northern Piper? Aren’t you sorry you asked? 
Now why in the world would any sane Merkin want to go messing with a system like that?
They don’t have to justify the difference because providers don’t bill different amounts to different insurance companies. They bill the same amount to each. The difference here is the amount they’re willing to accept as payment.
For example, let’s say that Dr. Radiologist charges $50 to read a chest x-ray, and he’s got three patients. Patient A has Medicare, Patient B has Blue Cross, and Patient C is self-pay. Dr. Radiologist bills Medicare, Blue Cross and Patient C $50, but he also knows that Medicare will pay five dollars and Blue Cross will pay ten, so when his office staff gets the money, they will write off the $45 and $40 difference, respectively. Patient C will just have to suck it up and deal because he’s on the hook for the full $50 unless he can negotiate a reduced payment.
It’s also not a safe assumption that insurance will always pay a claim. Using the above as an example, let’s say that Medicare denied Patient A’s x-ray as not medically necessary. Patient A is now on the hook for the $50 unless Dr. Radiologist’s staff can justify re-billing it with a different diagnosis. (This happens a lot in radiology, defensive medicine being what it is.) So by billing everyone $50, the radiologist can collect the full fee if the insurance denies the claim; if the radiologist had only billed the $5 he knows Medicare will pay, he’d only be able to collect the fiver.
Again - a deductible is a one-time expense (almost always yearly) - you pay 100% of the bill until the deductible is met, after which the insurance company kicks in.
Co-pay - (used to be a set amount, now is switching to a percent) is a portion of each event you pay. Regardless of deductible and if it has or has not been met.
I want to add:
Most insurance policies allow drugs, doctor’s visits (at least a few) and other common expenses to be covered even if the deductible has not been met.
The ACA plans with deductibles (for instance) require: general doc visits, specialist visits, lab work, prescription (at least most). and more to be covered even if the Deductible is not met.
As it turns out, the deductible only applies to emergency event - ER, hospitalization,and such.
The piece of crap I have allows a few doc visits w/o deductible, but, as I just found out, lab work is NOT exempt from deductible.
And, as far as insurance companies getting “discounts” and “negotiated rates”:
100% BULLSHIT
Just as the car dealer will pay you $5000 for that clunker you want to trade in (what a sucker! you know it’s worth only $1000!), he’ll do that deal all day long - because he’s adding $6000 to the price of your new car - and YOU are the one stuck with the taxes on the phony $6000).
The hospitals will print any number the insurance company wants on the bill:
I have one in front of me:
Lab
Hospital bill $303
Insurance company rate $192.
What a deal! Except $192 is about market rate for the work done.
And I have a direct apples-to-apples
ER visit with what looks like a real insurance card! Every intern in the place was after a piece of that pie. Bronchitis and respirator:
Hospital bill to insurance company: $2800
Doctor’s bill: $140.
Insurance company puts all of it to deductible.
Hospital calls. Oh, so you have to pay it?
Call it $600.
The docs still wanted the $140.
No, the private payer is NOT expected to pay the phony rate submitted to insurance companies.
Not according to the Exchange web site in my state (MD). All the plans that have deductibles specify stuff like “20% (after deductible)” for drugs or doctor visits.
coveredca.com is down for (scheduled) maintenance, so no link
But the summaries I see show “Amounts in black are exempted from deductible” and “Items in blue are subject to deductible”. Only the biggies are shown in blue. If the deductible is not waived for these items, I can move up to the gold level for less than the deductible (which I would hit, guaranteed)
I am trying to reach a salesperson (isn’t that a twist?) to confirm a few things (network, specific drugs, is the $40 lab co-pay per visit or per test). I’ll add it.
I tried looking at MD, but can’t find a way to look at policies without creating an account (estimated to take 5 minutes). Not that interested.
At least your state is participating.
Anecdotal only, but a company I once worked for arrived at an agreement with an American HMO. Not unusual in Canada; as we have US insurance companies operating here to cover the things our provincial health insurance doesn’t. (Aetna, Cigna, etc.; in addition to our own homegrown insurers–Canada Life, Manulife, Great West Life, etc.)
It turned out that our “insurance” plan didn’t kick in until we had had our dentists, optometrists, and pharmacists fill out a detailed questionnaire about each and every one of us. Even if they did (and most wouldn’t, owing to patient confidentiality concerns), we then found that we had to pay money for every visit–a co-pay, plus there was a deductible that kicked in after we had paid enough. However–and it is a big however–if we, through our spouses, had a plan from a Canadian provider (Canada Life, etc.), and used it, we had no co-pays, nor deductibles. That’s how Canadian supplementary medical plans work.
Needless to say, as Canadians accustomed to paying nothing at point-of-delivery, we were pissed. “I’ve got insurance, why is the dentist asking $20 just for a visit? If I have insurance, it ought to cost me nothing out-of-pocket.”
My employer got sick of employees’ complaints, and dropped the American HMO, with its deductibles and co-pays. It went with a Canadian provider, who charged neither.
I don’t know what policies CA has. Here is a typical “silver” Obamacare’s policy’s in MD:
Primary Care Visit to Treat an Injury or Illness - In Network $30 Copay after deductible
Primary Care Visit to Treat an Injury or Illness - Out Network 20% Coinsurance after deductible
Urgent Care Centers or Facilities - In Network 30% Coinsurance after deductible
Urgent Care Centers or Facilities - Out Network 50% Coinsurance after deductible
Specialist Visit - In Network $40 Copay after deductible
Specialist Visit - Out Network 20% Coinsurance after deductible
Emergency Room Services - In Network 30% Coinsurance after deductible
Emergency Room Services - Out Network 30% Coinsurance after deductible
Generic Drugs - In Network 20% Coinsurance after deductible
Preferred Brand Drugs - In Network 30% Coinsurance after deductible
Specialty Drugs - In Network 50% Coinsurance after deductible
With the family deductible of $3K in network, $6K out of network. Maximum out of pocket: in network $11K, out of network $22K.
The premiums for this policy for 2 adults, 2 kids, are about $13K/year.
To be fair there are Canadian companies that do have deductibles. I am with Great West Life and I have a yearly deductible of $25 dollars per member of my family covered on prescriptions and another $25 on dental visits. Granted, it is a laughably low deductible but it does exist.
As well, for prescriptions Canadian companies usually do have a co-pay. In my experience they will cover 80% or so leaving you with a 20% co-pay. Of course there are supplemental insurance policies that do not have a co-pay for prescriptions. I’m lucky in that my prescriptions are covered 100% after the $25 deductible.