The Average Joe’s Guide to coinsurance, deductibles, and copays

The words used in insurance are a source of confusion for the everyday person. As plan designs continue to change in an effort to be premium friendly, many more people are faced with deductibles and coinsurance, in addition to their general office copays. What does that mean for you?

Traditionally, PPOs (Preferred Provider Organizations) had plans with copays, deductibles, and coinsurance. Nowadays, many HMOs have adopted that plan design structure, only with access to in network providers. Therefore, people who in the past only paid copayments for any medical services, are having to pay deductibles and coinsurance in addition.

What is a copayment? It is a cost sharing arrangement in a medical contract, partially paying the actual cost of the office visit, medicine, or other procedures for the patient. The insurance company pays the remainder of the costs for that visit or service. Plans with deductibles have a further cost sharing of the contract with the patient paying for more of the medical expenses upfront, helping to lower the premium costs. A higher deductible generally equates to a lower premium.

Once a deductible is met, the final cost sharing comes with the coinsurance: the percentage split between the carrier and the patient. A patient pays the smaller percentage for all subsequent expenses, until the out of pocket maximum for the insurance is reached, usually based on a calendar year. Here is an example of how all of these insurance components would work for a patient named Joe.



Joe goes to the doctor with an upset stomach and general headache. He pays his copay at the office. Upon the doctor’s examination, it is determined that he has the viral infection currently going through all the school children, and he just needs to go home to bed and eat chicken soup. That copay is the total cost for the visit! However, if the physician was concerned that the stomach ache represented a larger problem, any tests or outpatient procedures scheduled in other locations would be applied against his $1000 deductible. Let’s assume Joe’s stomach ache progressively gets worse, and he is rushed to the emergency room in excruciating pain, and is subsequently hospitalized! Once his deductible is met, probably during his stay in emergency, all further charges for the hospitalization and any surgeries would be paid by the patient’s percent of coinsurance. Most likely during the hospitalization he would meet his out of pocket maximum. At that point, going forward, the insurance company would pay all other medical expenses to the end of the year, excluding any ongoing copays.



Current healthcare reform has altered cost sharing for preventive services, allowing access to preventative care for children and adults with new insurance policies, and renewing, non-grandfathered existing insurance plans. Going forward, federally accepted, age appropriate preventative care will be provided without any cost on the patient’s part. This does not mean that everyone will receive this care without copays or cost, but a consumer should check with their carrier or HR department to see if the new regulations will apply to them.

For many companies, now is the time to evaluate benefit packages and to enroll employees and their dependents before year end. Unfortunately, many people consider open enrollment to be a 24/7 opportunity. Traditionally, the employer chooses an eligibility period that must be met by the new employee for benefits. When waiting periods are met, the employee completes all necessary documents, enrolling him and any family members on the company plan. This is the first enrollment, and should that enrollment period be ignored or overlooked, the employee will find themselves without coverage until open enrollment. Open enrollment is only the narrow band of thirty days prior to the renewal of a firm’s insurance programs. Let’s review the expected process, and the life events that allow enrollment all through the year.

In Colorado, open enrollment exists for employees in the thirty days prior to the renewal of the health insurance. This will be an opportunity for dual income families to change between their separate employer plans, selecting the one that suits their needs best. Also, review your family’s enrollments to see that all eligible children are enrolled. This includes any stepchildren or other children that you are designated as the legal guardian. If children or spouses remain on separate employer or individual coverage, be certain that a waiver of coverage for them is given to your HR department. Should life change and specific qualifying events occur, this will allow family members who waived coverage, to enroll at other times of the year. They will not need to wait for the next open enrollment period.

Other enrollment opportunities are tied to important life events. Qualifying events include birth, adoption, marriage, divorce, and death. Job related events include the loss of employment, or the end of COBRA or State Continuation. Again, the opportunity to enroll because of these changes is limited to 30 days from the event. Missing the deadline will result in waiting to the firm’s annual open enrollment period tied to the renewal.

Healthcare reform is triggering additional opportunities to enroll. If you have a dependent under age 26, many carriers are allowing that person to enroll, some in a special open enrollment this October, and others at the company’s annual renewal. This enrollment can even be extended in some cases if that dependent is married. Please check with your HR department and the carrier as to the specific course they will require to enroll these overage dependents in this new environment.