Copay vs. high-deductible health plans: Which is better?

Looking for a health insurance plan that works for you? High-deductible health plans (HDHPs) and copay plans offer different approaches to managing your health care costs. We’ll explain how each plan works, advantages and considerations, and how to decide which is the better fit for you.

What is the difference between a deductible and a copay?

Deductibles and copays are different parts of a health insurance plan. Whether your plan includes a deductible, a copay or both depends on the type of coverage you choose.

• A deductible is the fixed amount you’re expected to pay each calendar year before your insurance starts covering the cost of care. For example, if your deductible is $2,000, you’ll need to pay that amount for covered services before your plan begins to contribute.
• A copay or copayment is a set fee you pay for specific health care services, like a doctor’s visit or prescription refill. Depending on your plan, you might start paying copays before meeting your deductible. Those copay amounts typically don’t count toward your deductible.

How a health insurance deductible works

Let’s say you have a high-deductible plan with a $2,500 deductible. Early in the year, you visit a specialist and receive a bill for $1,000. Since you haven’t met your deductible yet, you’d pay the full $1,000. Then, you go a few months without needing care until you need surgery that costs $5,000. You’d pay the remaining $1,500 of your deductible, then your insurance would start covering a portion of the remaining $3,500, depending on your plan’s coinsurance (your share of the cost for care after your deductible is met).

How a health insurance copay works

Now imagine you have a copay plan. You visit your primary care doctor and pay a $25 copay. A few weeks later, you see a specialist and pay a $50 copay. These fixed costs make it easier to predict your expenses, and in some plans, you don’t need to meet a deductible before your copays kick in.

Copay plans vs. high-deductible health plans: Which is better for you?

When choosing a health plan, there’s no one-size-fits-all answer. The best plan for you depends on your budget and individual health care needs.

Advantages and considerations of high-deductible health plans

High-deductible health plans typically offer lower monthly premiums (the cost you pay each month for your health insurance) but higher deductibles. They’re ideal for people who are generally healthy and don’t expect to need frequent medical care.

Advantages:

• Lower monthly premiums
• Preventive care is often covered at 100%
• Eligible for a Health Savings Account (HSA), which lets you save pre-tax dollars for medical expenses

Considerations:

• Higher out-of-pocket costs early in the year if you need certain types of care

Advantages and considerations of copay plans

Copay plans offer more predictable costs, with fixed copays for services. They often include a deductible, but it’s usually lower than most HDHPs. Copay plans are great for individuals or families who expect to use medical services regularly.

Advantages:

• Easier to budget for care
• Predictable, fixed costs for services
• Some plans allow you to access care without meeting a deductible

Considerations:

What is a copay-only plan?

A copay-only plan (also known as a variable copay plan) is a more modern approach to health insurance. There’s typically no deductible or coinsurance for in-network care, so you can see what you’ll pay ahead of time for every service. There’s no complicated math, just a simple, clear, straightforward price for everything. And each copay you pay contributes to your out-of-pocket maximum, so you’re protected from excessive costs.