Co-payments are one of the most common types of fees in health insurance plans. Chances are that your employees are asked for their co-pay just about every time they receive non-preventive medical care.
But just because co-pays are a common reality doesn’t mean they’re well understood by all. It’s important that you and your HR team grasp the basics behind these payments so you can clear up any confusion for your workforce.
How It Works
A co-payment is a fixed fee that an employee needs to pay when they receive medical care. For example, an individual might need to pay $50 every time they see their primary-care physician for a non-preventive service. Different types of medical care typically have different co-payment rates. The co-pay for emergency room visits, for example, is generally higher than for appointments with a primary physician.
The co-payment is not based on the cost of actual medical services received. Each time you visit your doctor, your co-pay will be the same (until you reach your out-of-pocket maximum), regardless of the treatment. However, there are other out-of-pocket expenses that employees might need to pay on occasion that are based on the cost of treatment, such as co-insurance payments or deductibles.
The Logic Behind Co-Pays
Health insurance plans charge co-pays to balance out their costs. Instead of charging everything up front with the monthly premium, insurers make a portion of their money back when people go in for treatment. Plans with higher premiums typically have lower co-pays, while these per-visit costs may be higher with plans that have low premiums.
Co-payments also discourage overuse of health insurance. If it was free to see a doctor, some people might drop by all the time. With co-pays, people tend to see their doctor only when they actually need treatment. This prevents waste and thereby keeps health care costs down for everyone.
Co-Pays and Your Team
When you compare different potential health insurance plans for your company, the co-payment is one of the main factors you should consider. You’ll need to understand whether employees receive care often enough to justify a plan with higher premiums and lower co-payments. Try polling your employees to get an idea of how often they would run into co-pays, and see how this compares to what they would pay in higher insurance premiums throughout a typical year. You’ll then have a better grasp on which type of plan will be the most affordable for your team.
Once you decide on a plan, share the co-pay rates with your staff so they know how much they’ll need to pay to see a doctor, go to the hospital, fill a prescription or receive other kinds of care. This information may be on their insurance card, but it never hurts to make sure the details are crystal clear. Usually your broker or a representative from your health insurance carrier will be happy to come by your workplace and hold meetings with your employees to explain the plan.
And because co-payment rates can change annually, be sure to keep employees updated. A yearly reminder email or meeting is a chance for you to refresh the team on how their co-payments work.
By staying informed and keeping your workforce up-to-date, you can ensure that both you and your employees will be prepared for whatever co-pay system your next health insurance plan will bring.
David Rodeck is a professional freelance writer based out of Delaware. Before writing full-time, he worked as a health- and life-insurance agent. He specializes in making insurance, investing and financial planning understandable.