It can be challenging to make your way through health insurance forms and terminology. The terms copay and deductible may be particularly confusing, since they are related. Yet there are key differences that should be understood about copay and deductible, which can help you decide (if you have a choice) which insurance may provide better benefits.

A copayment can be called a point of service payment, something you’d give to doctors, other allied health workers, like physical therapists, and possibly to labs when you receive service. It is part of your payment toward that particular bill and something you usually need to bring with you at the time of service. Copay rates vary depending upon the type of service you are getting and the type of insurance you have, and could be as low as about $5 US Dollars (USD) to $30-40 USD. This is your payment share of that particular visit.

In contrast to the copay, the deductible is the amount of money that you must pay before major services are covered, usually things like hospitalizations or surgery. Again, the amount can be highly dependent on the type of insurance you have, and deductible is usually figured on a yearly basis. Each year when your insurance renews, you have paid no money toward the deductible and start fresh.

Say for instance your deductible is $500 USD. This means that before the insurance company will start paying for services, you’d have to pay $500 USD out of your own pocket. If you went to the hospital to have a surgery, the first $500 USD of that bill would be directed toward you, and you’d have to pay that amount before the insurance company kicked in with payment. Usually deductibles are higher than this, sitting in the range of several thousand dollars.

This is where the difference between copay and deductible gets extremely tricky. In most cases, when you have both copay and deductible, insurance will cover their part of things like doctor’s visits before you reach your deductible limit. Therefore when the new insurance year starts, and you visit a doctor, you’re usually responsible for the copay only, and not the deductible amount.

However, if you need a major or minor operation, you’d have to meet that deductible prior to getting reimbursed for the rest of these expenses. Also, in many cases insurance companies don’t count your copays as fulfilling part of your deductible expenses. A lot of insurances charge something different from copay and deductible, and require you to pay a percentage of certain expenses. This may be considered a copayment too by some insurers.

Again from the example of a new insurance year, you might need to meet a $1000 USD deductible, and then also pay a percentage of the remaining amount due for service, which may be called a copayment. If you have that surgery and it costs $26,000 USD, the first $1000 USD is your responsibility alone. On the remaining amount, you might owe a percentage, say 10%. In total, your bill for the surgery would be $1000 USD and $2500 USD equaling $3500 USD.

Some insurers also offer a maximum amount you need to pay in costs per year, which may be the same amount as your deductible. If you have a lengthy hospital stay, the insurer might only require you to pay to that maximum. So for instance if the maximum amount you need to pay per year is $2000 USD, all costs beyond that point might be covered. Other insurers give a maximum amount they will pay within a given year or a lifetime. If your medical expenses exceed this amount, you would need to pay any expenses beyond it.