What is the main difference between a copayment and coinsurance?

The main difference between a copayment and coinsurance lies in how these costs are structured in a health insurance plan. A copayment is characterized as a fixed dollar amount that a patient must pay at the time of receiving a service, regardless of the total expense of that service. For instance, a health plan may specify a copayment of $20 for a doctor's visit.

On the other hand, coinsurance is calculated as a percentage of the total cost of a service after the deductible has been met. If a plan has a 20% coinsurance, and the total bill for a service is $100, the patient would be responsible for $20, but if the total cost was $500, the patient would owe $100.

Understanding this distinction is crucial as it impacts how much a patient may have to pay out-of-pocket depending on the services they receive. This foundational knowledge aids individuals in navigating their health insurance policies more effectively, particularly when selecting health plans or estimating costs for potential medical care.