Co-payments

Insurance companies use the nice sounding word "co-payment" to mean "we don't pay for that." In short, a co-payment is money someone has to lay down for part of a doctor's visit or medical procedure before an insurance company pays the part they cover.

Generally, co-payments are portions of medical bills (typically a flat fee of $10 to $25) patients pay when they visit a doctor's office or buy prescription drugs. Other co-payments apply when someone is referred to a specialist or other health care professional, such as a physical therapist. Depending on the specialist and the insurance plan, a patient might have to pay the entire cost for these referrals up front and wait for reimbursement from the insurance provider.

Filing the Claim

In essence, a co-payment, also referred to as "co-insurance," can be deemed to mean any expense that must be paid by the person seeking medical care, called out-of-pocket expenses. Also, the term "annual out-of-pocket maximum," refers to how much the insured has to pay for the whole year out of their pocket, excluding premiums.

These expenses can vary depending on the type of health insurance a person has. For indemnity, or "pay-for-service" plans, which is the more traditional form of insurance, the insurance company pays only after receiving a bill. The insurer pays what it considers to be the "usual and customary" charge for services. If the health care provider charges more than what the insurer deems to be usual and customary, the difference between what is paid by the insurer and the total bill (minus the co-payment) also might be charged to the patient.

In most cases these days, that means the doctor's office, hospital, or specialist files the claim with the insurer and receives payment directly from them. In some cases, the patient has to pay out of pocket and receive reimbursement.

Managed Care

For managed care plans, such as health maintenance organizations (HMOs), there is less paperwork and fewer out-of-pocket expenses for the individual. This is because the HMO has an existing relationship with the health care provider through which reimbursement already has been worked out. The flip side of that is that managed care patients can only see those approved by the organization.

In some cases these days, HMOs and other managed care groups are allowing patients to visit specialists and others outside the network, usually at a higher out-of-pocket cost. Without that provision, any visits to doctors outside the network are not covered and the individual has to pay 100 percent of the expense.

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