Co-payments can be difficult to understand, but they are one of the most basic health insurance terms, making it critical for anyone with a health insurance policy to understand how they work. Generally speaking, co-payments are amounts of money paid by an insured individual for their health care. These payments are usually made directly to the service provider, and are only a small portion of the actual bill.
Co-payments can vary based on the type of care received and the insurance provider. Many plans also change co-payment rates for their clients based on whether or not the provider they see is in or out of network. Typically, the cheapest care has the lowest co-payment rates, while co-payments increase with more expensive care. For example, seeing an in network pediatrician at his or her office will typically only cost a few dollars, while visiting an out of network emergency room may cost several hundred.
Typically, insurance companies have their clients make co-payments for two reasons. To start, by making a patient pay for a portion of his or her care, some of the financial obligation for the care is lifted from the insurance company. In some cases, co-payments will cover the entire cost of an office visit. In other cases, however, the co-payment is less than one percent of the total cost of care.
Nonetheless, patients must still make the co-payment because it has been shown that patients are less likely to use more expensive services when they have to shoulder some of the costs of care themselves. This is part of the reason why insurance companies have higher co-pays for more expensive services. For example, a patient with an acute health problem will typically have a lower co-payment by making an appointment with their primary care physician than they would have to pay if they went to the emergency room. The primary care physician, however, will typically charge a third of what the emergency room visit will cost. By having a lower co-payment to see the primary care doctor, the insurance company encourages their patients to choose the cheaper option while still offering coverage for an emergency room visit if a real need arises.