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Do copays count toward the out-of-pocket maximum? The deductible?

What you need to know about reform and copay-based health plans 

With all the noise about healthcare reform, many have missed the fine print that indicates a big change for copay-based health plans. Beginning in 2014, all in-network cost-sharing, including copays, must count toward the out-of-pocket maximum (OOPM).

What this means is now when you visit the doctor or pick up a prescription, all of these expenses count toward the maximum amount you will have to spend for the year.  

There are two things to note with this change: 

  1. The cost of your copay plan may go up. Why? Anytime a plan’s benefits increase, what happens? The cost goes up. 
  2. On most plans, copays do not count toward your deductible.  

Now, let’s look at copay-based health plans prior to reform and post-reform. 

Copay-based health plans prior to reform 

Prior to healthcare reform, copays at the doctor or pharmacist did not count toward your deductible or out-of-pocket maximum. This wasn’t a huge deal for someone with low healthcare expense because a $35 copay here or a $10 copay there didn’t represent a lot of healthcare dollars. 

However, this rule was a big deal for someone who was on multiple prescriptions and/or had numerous visits to the doctor. Why? Because this person was continually paying copays that didn’t ever get him or her any closer to meeting his or her deductible or out-of-pocket maximum. 

Let’s take an example . Jake has a copay-based health plan with 80 percent coinsurance, a $2,000 deductible, and a $3,000 out-of-pocket maximum. After two doctor and three specialist visits, Jake is diagnosed with diabetes and told he needs to take two medications each month. Since Jake is on a copay-based health plan, he pays $25 for each visit to the doctor, and $40 for each specialist visit. The two medications will cost him $30 and $60 per month. 

Therefore, Jake’s copays look like the following:

$50(2 doctor visits) + $120(3 specialist visits) + $360($30/month medication) + $720($60/month medication) = $1,250 

This $1,250 does not count towards Jake’s deductible or out-of-pocket maximum. Why does this matter? Well, let’s say Jake gets in a car accident and has to be rushed to the emergency room for surgery. The medical bills from the emergency room total $17,000. 

Jake is responsible for paying his deductible ($2,000) plus 20 percent of $17,000= $5,400 

Jake’s out-of-pocket maximum is $3,000, so he’s responsible for paying $3,000 of the $5,400. 

And this is all in addition to the cost of his copays, $1,250. 

So Jake’s total medical bills for the year would be $1,250 (copays) + $3,000 (emergency room bills) = $4,250

Prior to reform, many people didn’t realize that copays were just empty payments that didn't count toward either the deductible or out-of-pocket maximum. 

Healthcare reform has changed this, and now copays must count toward the out-of-pocket maximum. Let’s look at the rules post-reform. 

Copay-based health plans post-reform 

Starting in 2014, copays must count toward the out-of-pocket maximum. This standard is mandated by healthcare reform and applies to all plans, except grandfathered or grandmothered ones. 

However, it must be noted that whether or not copays count toward the deductible depends on the plan/carrier. Most likely, copays won’t count toward the deductible. Call the number on the back of your insurance card to get the exact details for your plan. Or, if you haven’t already selected a health plan, you can read the EOB or call the insurance company to check on whether or not copays count toward both the deductible and the out-of-pocket maximum or just the out-of-pocket maximum. 

Let’s look at Jake’s situation again, this time with post-reform rules in place. Jake calls his insurance company (being the savvy healthcare consumer he is!) to check on his copays and deductible. He discovers that copays do not count toward his deductible. 

Therefore, Jake’s copays look like the following:

$50(2 doctor visits) + $120(3 specialist visits) + $360($30/month medication) + $720($60/month medication) = $1,250 

Now, Jake is rushed to the emergency room. The medical bills from the emergency room total $17,000. 

Jake’s payout for emergency room bills: 

$2,000(to meet the deductible) + 20 percent ( $15,000 leftover from the ER bill)= $5,000

With reform rules in place, Jake’s copays count toward his out-of-pocket maximum and therefore he would only be responsible for paying $3,000 total, but only $1,750 for this emergency room visit. 

So Jake’s medical bill for the emergency room in this scenario would be $1,750 versus $3,000. Quite a bit of savings! 

Takeaways for the healthcare consumer 

Let’s look at four takeaways for the healthcare consumer in regards to the new rules about copays and the out-of-pocket maximum. 

1. Copays must now count toward the out-of-pocket maximum for all new health plans. If you have really high healthcare expenses, this is a huge positive for you with regards to your overall healthcare expenses for the year. 

2. If you have an older copay-based health plan (grandfathered or grandmothered), your copays will not count towards the out-of-pocket maximum. Not sure if your plan is old or new? Call the number on the back of your insurance card. 

3. In most cases, copays do not count toward the deductible. When you have low to medium healthcare expenses, you’ll want to consider this because you could spend thousands of dollars on doctor visits and prescriptions and not be any closer to meeting your deductible. 

4. Better benefits for copay plans mean higher costs. You’ll want to factor in paying more in premiums for the benefit of copays counting toward the out-of-pocket maximum. 

Healthcare reform has made significant changes to your insurance and we promise to continue to keep you informed on all the fine print. 

 To learn more about how health insurance works and how to use it, download the free "Health Insurance Buyer's Guide." Click here to download.

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