Most of us understand what a copayment is, right? It’s a fixed dollar amount that the insured pays for certain covered services on a health plan before benefits are paid by the plan. Usually, but not always, benefits that apply these copayments, or copays for short, are paid before the calendar-year deductible has been met and after the copay has been paid by the insured. Some HSA-qualified plans, though, do have copayments for prescriptions that kick in after the deductible has been met.

When discussing how their health plan works with our clients, the conversation might go something like this:

When you go to the doctor or the pharmacy, you pay a predictable, flat-dollar copayment. For most other services, like hospital stays or outpatient surgery, you must first pay a calendar-year deductible, then you pay a coinsurance percentage until the total of your deductible, coinsurance, and copayments add up to your out-of-pocket maximum.

If you go out-of-network (if the plan has an out-of-network benefit), you do not have any copayments and do not benefit from any carrier discounts. Plus, your deductible, coinsurance, and out-of-pocket exposure are all twice as high as the in-network amounts, which is why it’s always better to stay in-network whenever possible.

Unfortunately, the insurance companies don’t make the conversation quite that easy. The client tutorial is complicated by the fact that, recently, many plans have introduced facility copayments for inpatient hospitalization, outpatient surgeries, and emergency room visits. These copayments are confusing because the client might be under the impression that the copayment represents the total cost of the service, but that is generally not the case.

Instead, these facility copayments are fixed amounts that members are required to pay when they receive one of these more costly services. On some, but not all plans, the remaining facility charge, plus the full amount of the doctor charges, apply toward the calendar-year deductible and coinsurance amount. The facility copayments, while they are credited to the plan’s out-of-pocket limit, do not reduce the deductible.

On other plans, more often on HMOs, the facility copayment might actually cover the entire cost of the service. Often, you won’t be able to tell from the quote alone; you might need to review the Summary of Benefits and Coverage (SBC) to find out.

If a client purchases a plan with these facility copayments, it’s important to explain in advance how they work. That’s a lot easier than having the discussion when the client is at the admissions desk in the hospital. While you may not have time to review every single benefit with every single client, this is a big one that you should make sure your clients understand.