Deductible vs. Copayment: What's the Difference?

If you’re new to health insurance, understanding how much you’re required to pay toward the cost of your healthcare expenses, when you have to pay it, and how much of the tab your health plan will pick up can be confusing.

Health insurance deductibles and copayments are both types of cost-sharing, which refers to the way health insurance companies split the cost of your health care with you. So, what's the difference between deductible and copayment? They differ in when you have to pay, how much you have to pay, and what’s left over for your health plan to pay.

This article will explain how deductibles and copayments work and what you need to know about them in order to use your health coverage.

Deductibles

A deductible is a fixed amount you pay each year (or each benefit period, if you're enrolled in Original Medicare and need inpatient care) before your health insurance kicks in fully. Once you’ve paid your deductible, your health plan begins to pick up its share of your healthcare bills. Here’s how it works.

Let's say your plan has a $2,000 deductible and counts all non-preventive services towards the deductible until it's met.

• You get the flu in January and see your healthcare provider. After your health plan's negotiated discount, the practitioner’s bill is $200. You are responsible for the entire bill since you haven’t paid your deductible yet this year. After paying the $200 medical professional’s bill, you have $1,800 left to go on your yearly deductible.
• In March, you fall and break your arm. The bill after your health plan's negotiated discount is $3,000. You pay $1,800 of that bill before you’ve met your yearly deductible of $2,000. Now, your health insurance kicks in and helps you pay the rest of the bill.
• In April, you get your cast removed. The bill is $500. Since you’ve already met your deductible for the year, you don’t have to pay any more toward your deductible. Your health insurance pays its full share of this bill.

However, this doesn’t mean your health insurance will pay the entire bill and you won’t have to pay anything. Even though you’re done paying your deductible for the year, you may still owe coinsurance until you've met your plan's maximum out-of-pocket for the year (in most cases, coinsurance applies to services that would count towards the deductible if you hadn't already met it for the year).

The out-of-pocket limit applies to all in-network care that's considered an essential health benefit. It includes the amounts that enrollees pay for the deductible, copays, and coinsurance.

Once the enrollee's combined deductible, copays, and/or coinsurance reach the plan's out-of-pocket maximum, the member won't have to pay anything else for the rest of the year (for in-network, medically necessary care that's considered an essential health benefit), regardless of whether it would otherwise have required a copay or coinsurance.

This assumes, however, that they continue to be insured under the same plan for the whole year. If you switch plans mid-year (due to a job change or qualifying life event), your out-of-pocket costs will reset at zero under the new plan.

Copayment

A copayment is a fixed amount you pay each time you get a particular type of healthcare service, and copays will generally be quite a bit smaller than deductibles. But deductibles and copays are both fixed amounts, as opposed to coinsurance, which is a percentage of the claim.

On some plans, certain services are covered with a copay before you've met the deductible, while other plans have copays only after you've met your deductible. And the pre-deductible versus post-deductible copay rules often vary based on the type of service you're receiving.

For example, a health plan might have $25 copays for visits to your primary care physician, right from the start (ie, no deductible required), but the same plan might have a $500 drug deductible that you have to pay before you start to get medications with a copay (in other words, you'd have to pay the first $500 in drug costs, and then you'd switch to having copays that vary based on the drug's tier).

If your health plan requires you to meet a deductible (medical or prescription) before copays kick in, you'll have to pay the full cost of your health care until you meet the deductible—albeit the network negotiated rate, as long as you stay in-network.

But many health plans apply the deductible to some services and copays to other services, right from the start. Copay services often include primary care visits, specialist visits, urgent care visits, and prescription drugs. Depending on how your plan is designed, you may have coverage for some or all of these services with a copay, regardless of whether you've met your deductible. That means your insurer will be sharing the cost of your care right from the start of the plan year.

But for other services, generally including lab work, X-rays, surgeries, inpatient care, etc., you'll likely have to meet a deductible before your insurance plan will start to pay for part of your care (and in most cases, you'll then have to pay coinsurance until you've met the maximum out-of-pocket for the year).

So if you have a $2,000 deductible in addition to various copays to see your primary care healthcare provider or specialist or have a prescription filled, you'd have to meet your deductible for treatments other than those covered by copays.

Similarities

Deductibles and copayments are both fixed amounts, meaning they don’t change based on how much the healthcare service costs. This is in contrast to another type of cost-sharing, coinsurance, in which you owe a percentage of the bill rather than a fixed amount.

You know when you sign up for health insurance how much your deductible will be that year; it doesn’t vary based on what type of services you get or how expensive those services are. If you have a $1,000 deductible, you’ll pay a $1,000 deductible whether your hospitalization cost $2,000 or $200,000.

But some plans have a separate deductible that applies to prescription drugs, in addition to the deductible for other medical services. And as noted above, Medicare Part A has a deductible that applies to a benefit period rather than a calendar year. But it's still a predetermined, set amount that applies regardless of how much the medical care costs.

(Medicare adjusts the deductible amount each year; for 2023, it's $1,600. And for 2024, it's projected to be about $1,652.)

You also know when you sign up for health insurance what your health plan’s copayment requirements are since they’re also a fixed amount. When you see a specialist, if your health plan requires a $50 copay for seeing a specialist, you’ll owe $50 whether the specialist’s bill is $100 or $300 (as long as the specialist is in your health plan's network, and you comply with any preauthorization or referral requirements that your health plan has).

If you see the healthcare provider for a preventive healthcare visit that falls within the list of preventive care that insurers are required to fully cover, you won’t pay anything toward your deductible for that visit, and you won't have to pay a copayment for that visit, either.

Note that some services that might be offered during a preventive visit won't necessarily be covered in full since the preventive care mandates only require certain preventive care benefits to be fully covered. Check with your insurer before you schedule a preventive care visit to make sure you understand what's covered and what's not.

Key Differences

The difference between copays and deductibles is generally the amount you have to pay and how often you have to pay it. Deductibles are generally much larger than copays, but you only have to pay them once a year (unless you're on Medicare, in which case the deductible applies to each benefit period instead of following the calendar year). Once you’ve met your deductible for the year, you don’t have to pay it again until the next year.

But copayments are ongoing. You keep paying copayments each time you get a healthcare service that requires them no matter how many copayments you’ve paid during the year. The only way you stop owing copayments is if you’ve reached your health plan’s out-of-pocket maximum for the year. Reaching the out-of-pocket maximum is unusual for most people, and only happens when you’ve had really high healthcare expenses that year.

Summary

Deductibles and copayments (copays) are both a form of health insurance cost-sharing. Deductibles tend to be larger and only have to be met once in each plan year, either as a result of one large claim, or several smaller claims added together. Copayments tend to be smaller and have to be paid each time a person sees the doctor, visits an urgent care clinic, fills a prescription, or receives any other service to which a copay applies under the plan. Both deductibles and copayments will count towards a health plan's annual out-of-pocket maximum.

A Word From Verywell

Most health plans have a deductible for some services, and copays for other services. But some plans use only copays, and other plans just have a deductible (plus coinsurance after the deductible is met, until the out-of-pocket maximum is reached). The more you understand about how your plan works, the better you'll be able to plan for medical costs, both large and small. It's a good idea to read through your plan's summary document before you need medical care, so that you know what to expect if and when you do need to seek treatment.