At the most basic level, copays are a cost-sharing measure that insurance companies implement as part of their coverage plans. Typically, a copay is a fixed amount that's established based on the plan and the specific service. However, copays are just one part of a larger cost-sharing structure.
Cost-sharing comes in three primary forms: copays, coinsurance, and deductibles. Plans may be complex, but patients using health insurance need to pay special attention to these elements because they define what we're required to pay when we receive medical care.
Copay — This is a fixed fee your insurance company has set as part of an insurance plan based on the services rendered, from office visits to prescription drugs and other kinds of care. Because copays are a fixed fee, the insured person knows their financial obligation ahead of time, and is required to pay before receiving care.
Coinsurance — This is an amount calculated as a percentage of the total cost for a covered medical service. If an insurance company owes a doctor $100 for a patient's visit, and the patient's plan has a coinsurance percentage of 25%, the insured patient will be required to pay $25 towards the cost of that visit.
Deductible — A deductible is a set dollar amount that the insured patient is required to pay before the insurance company begins paying their portion of claims. Typically, deductibles reset annually.
Copays: How We Got Here
The concept of cost-sharing as part of healthcare was designed originally by a group of providers and hospitals during the Great Depression. These conglomerations set not-for-profit "subscription fees" to ensure families and communities could continue to receive the care they needed.
Over time, as care extended within these communities, costs continued to rise. Then there was a push for private plans that established their own cost-sharing measures.
While on the surface, private plans were seeking to extend coverage much like the "subscription fees," they placed more financial requirements on their members. Instead of covering the cost of care from the first dollar paid, they required the insured to pay copays and deductibles before their coverage kicked in.
Part of it is based on economy. Private plans are in the business of making money, so they have an incentive to keep their costs low and pass on as much of the cost as possible.
However, they also intended to prevent members from seeking unnecessary care. If members had the perception that their healthcare was essentially free after their basic fees, they would be tempted to access services every time they sneezed. When members are required to share the burden of paying for care, insurers believed, they are less likely to abuse their benefits.
Ryan Schmid, President & CEO of Vera Whole Health, goes more in-depth and shares:
"There are two primary drivers for why we have copays. One is that it is simply a method, usually the employer, to shift costs onto the employee. So it just saves the plan money, that's one.
"But the bigger reason for copays is based in a consumerism concept that if members have to pay for something, they're going to be better purchasers. If it's free, then there's potential they'll overuse it, won't value it as much, or they'll abuse it."
Copays, as well as other cost-sharing measures, may have been well-intentioned, designed to prevent a patient from seeking unnecessary acute care. However, the reality is that many cost-sharing requirements prevent access.
Copays can mean less access to care
As the cost of healthcare has continued to rise over the last several decades, cost-sharing measures like copays have also increased. What was originally intended to prevent patients from breaking the bank when they needed care is now preventing many from seeking care at all.
Insurance companies have a vested interest in delivering as little treatment as possible and passing on whatever costs they can. Ultimately, health insurance is a for-profit industry, and cost-sharing requirements are creating even more profit opportunities.
In 2016, over 39% of Americans from ages 18 to 64 held high-deductible health plans. That's up from 26% in 2011.
We believe the model of healthcare that the industry needs now and in the future, to both contain costs and make quality care accessible, is based upon an advanced primary care model that manages all care, including referrals to high-quality, low-cost specialists. It contains cost for employers, but it's also convenient and less costly for employees.
This approach also means no copays or other financial barriers for employees. They make an appointment and spend time with their primary provider. It's a simple.