What is the difference between a copayment and coinsurance, and how are each applied?

• A. Copayment is a fixed amount paid at the time of service; coinsurance is a percentage of the cost after the deductible.
• B. Copayment is a percentage; coinsurance is a fixed amount.
• C. A deductible must be paid before either copay or coinsurance applies.
• D. Coinsurance is never applied to hospital visits.

Answer: (A)

The difference centers on how you pay for services: a copayment is a fixed amount you owe at the time of service, while coinsurance is a percentage of the cost you pay after you’ve met your deductible.

With a copayment, you know the exact amount you’ll pay when you receive the service (for example, a doctor visit might require a $20 copay). That fixed fee is paid up front, and the rest of the service cost is handled according to the plan’s rules, but your copay does not vary with the total bill.

With coinsurance, your share is a percentage of the allowed charge once you’ve satisfied the deductible. For instance, if you have a 20% coinsurance and the service costs $1,000 after you’ve met your deductible, you would pay $200 and the insurer would cover the remaining $800. The actual amount you pay can change with the price of the service, which is why coinsurance is described as a share of the cost rather than a fixed amount.

Also, coinsurance can apply to many hospital or other services, and plans may combine both copays and coinsurance in different ways. A deductible is a separate feature you must meet before much of the coinsurance (and sometimes copays for certain services) comes into play, but the key distinction remains: fixed upfront payment for a copay versus a percentage share for coinsurance.