When you have health insurance, it's not just your monthly premium you'll spend money on. Even once you pay that premium, you'll still be subjected to certain out-of-pocket costs, such as deductibles and copayments.

A deductible is the sum you're required to pay toward your medical care before your insurance company starts to cover your services. A copayment, or copay, by contrast, is the preset amount you'll pay for doctor visits and prescription drugs once your deductible has been met. When choosing a health plan, be careful not to get too hung up on its premium alone. A plan with a low premium could end up costing you more money in the long run if its deductibles and copayments are high.

Couple paying for a doctor visit


Deductibles versus copayments

A deductible is the amount you'll need to pay out of pocket before your insurance company pays for your services. Say your plan comes with a $2,000 deductible. What this means is that you'll need to spend that $2,000 in full before your company starts covering the cost of your healthcare.

Once your deductible is met, your insurer will start paying for your services in full, but you'll still be responsible to share in those costs via a copayment, which is the fixed amount you'll pay for various services under your plan. Your copayment will typically be considerably lower than your deductible, unless, of course, you happen to be among the lucky few with a no-deductible plan.

So say your plan comes with a $25 copayment, and you've already met your deductible. The next time you visit the doctor, your insurer will pay for that visit, but you'll still be required to pay $25 yourself.

Which plans offer the lowest deductibles and copayments?

It tends to be the case that insurance plans with lower premiums come with higher deductibles and copayments. On the flipside, a pricier plan might result in a lower deductible, and more affordable copayments. That's why you'll need to run the numbers to see which option makes the most sense for you.

Say you're given the choice of two plans. The first has a $200 monthly premium with an $8,000 deductible and $40 office copay. The second has a $400 monthly premium with a $1,000 deductible and $20 office copay. If you use your coverage a lot, you might come out ahead by opting for the second plan, even though its premium is higher. This especially holds true if you end up requiring an expensive procedure, or get diagnosed with a health condition that requires weekly medical appointments.

Though you might initially be drawn to a health plan with the lowest premium available, keep in mind that in doing so, you may be taking on the risk of paying more in your deductible and copayments. Ultimately, healthcare can get expensive no matter how you look at it, so the key is to find the best possible coverage at the lowest overall cost.

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