Understanding Deductibles, Coinsurance, and Copays

It may come as a surprise to you, but patients often find insurance terms confusing.

As a provider, it’s important to understand how these impact both billing and collections. Here's a clear breakdown you can use to assist in clearing these things up!


In this Article:

What is a Deductible?

A deductible is the amount a patient must pay out of pocket each year before their insurance begins to cover services.

Key Points:

  • Deductibles typically reset annually (usually January 1, but sometimes mid-year)
  • Until it’s met, insurance does not pay for services
  • You must submit claims to have the visit count toward the patient’s deductible
  • You may only collect your contracted rate—not your full fee—if you are in-network
  • The patient pays the full contracted amount for each visit until the deductible is met

Example:

  • Your full fee: $180
  • Contracted rate with insurance: $120
  • Patient’s annual deductible: $1,500
  • The Patient has not met their deductible

In this case:

  • The patient pays: $120 (contracted rate)
  • That $120 is applied toward their deductible
  • You do not collect your full $180 rate

Once the deductible is met, insurance starts covering a portion or all of the cost, and you'll receive payment from insurance and/or the patient based on their plan. See Coinsurance below.

What Is Coinsurance?

Coinsurance is the percentage of a covered service that the patient pays after the deductible is met.

Key Points:

  • Applies only after the deductible has been met
  • It is a percentage, not a flat fee
  • Insurance pays the remaining percentage
  • You are still paid only your contracted rate

Example:

  • Contracted rate: $120
  • Deductible has been met
  • Coinsurance: 20% of this insurance's contracted rate (20%x $120)


In this case:

  • Patient pays: $24 (20%)
  • Insurance pays: $96 (80%)
  • You receive: $120 total

What Is a Copay?

A copay is a fixed dollar amount a patient pays at the time of service—regardless of whether their deductible is met.

Key Points:

  • Always a flat fee (e.g., $20, $35, $50)
  • Due at time of service
  • Set by the insurance plan
  • Does not vary based on the service cost

Example:

  • Patient’s insurance has a $30 copay for office visits
  • At check-in, the patient pays you $30

What is a Contracted rate?

A contracted rate is the amount an insurance company says they allow as a total reimbursement is for a covered service that you provide to a client.

How do you know what your contracted rate is?

Check your contract or call the insurance company's provider relations department to inquire.


Example:

  • What I typically charge for a 90837: $175
  • My contracted rate with this insurance company: $120
  • The $55 difference is the amount I have to adjust off of my accepted fee for this insurance company

(Don't worry..an insurance company won't pay you more than your contracted rate!)

Important Notes for Providers

  • Do not waive coinsurance/copay unless it’s a documented financial hardship—this can violate your insurance contract
  • Always review the Explanation of Benefits (EOB) to confirm what the insurance paid and what the patient owes
  • Be prepared to explain coinsurance, especially since patients often confuse it with copays
  • Collect copays/coinsurance at check-in — this is standard practice and expected
  • You are required by most insurance contracts to collect the copay; routinely waiving it can be a violation
  • Copay ≠ Coinsurance:
    • Copay = flat fee
    • Coinsurance = percentage (after deductible)