Understanding Health Insurance Costs

Copays

A copay is a flat, predictable dollar amount a member pays at the time of service. Unlike deductibles or coinsurance—which can vary based on the cost of care—copays are simple, fixed fees designed to give members clarity and encourage appropriate use of routine services.

Copays typically apply to:

• Primary care visits

• Specialist visits

• Urgent care

• Most prescription drugs

• Certain preventive or routine services (when not covered at 100%)

How copays work

• Copays are usually not applied to the deductible (except in rare plan designs).

• Members pay the copay upfront, and the health plan covers the rest of the contracted service cost.

• Because copays simplify the member experience, plans with richer copay structures typically come with higher premiums.

• High-cost services (hospitalizations, outpatient surgeries, imaging) generally bypass copays and instead apply to deductible + coinsurance.

Typical copay amounts (2025 market ranges)

• Primary care: $20–$40

• Specialist: $50–$75

• Urgent care: $50–$100

• Generic Rx: $5–$20

• Preferred brand Rx: $30–$60

Key employer insight

Copays are a powerful cost-management lever:

• More copay-based services → higher premiums but lower day-to-day employee spend

• Fewer copays (more services pushed into deductible/coinsurance) → lower premiums but higher upfront member costs

Employers increasingly shift non-routine services out of copay tiers and into deductible-based cost-sharing as a way to manage premium growth.

A deductible is a first-dollar expense incurred by the member when consuming those services that are subject to deductibles. These would be typically high-cost services such as inpatient hospitalization, outpatient surgery, complex imaging services such as MRI, PET, CT scans.

For example, in a family of 4, in a plan that has $1000 / $2000 as individual and family deductible, each covered member’s use of deductible services is subject to the $1000 cap, while collectively they are subject to $2000 cap. This is how normally an embedded deductible works in most plans.

The amount a member must pay before the plan begins covering many services. Typically applied to:

• Hospitalization
• Outpatient surgery
• Complex imaging (MRI, CT, PET)

Types:

• Embedded deductibles: each member has an individual cap + a family cap.
• Aggregate deductibles (common in HSA plans): the entire family must meet the full family deductible before the plan pays.

Typical ranges (2025):

• Rich PPO plans: $500–$1,000 individual
• Standard PPO: $1,500–$2,000 individual
• HSA-eligible plans: $1,650+ individual; $3,300+ family
• Catastrophic or leaner plans: $5,000–$7,000+ individual

Deductibles count toward the annual out-of-pocket maximum, which is the federal consumer protection limit.

Coinsurance is a portion of the medical cost the consumer is responsible to pay. Coinsurance comes into the picture typically for high-cost services after the deductible is met by the consumer.

Plans that have 0% coinsurance do not require the consumers pay anything after the deductible is met. If there is a coinsurance of 20%, then the members have to pay 20% of the amount remaining after meeting the deductible of the contracted fee for the service.

For instance, if a plan has a $2000 deductible and 20% coinsurance, in a scenario of a childbirth that may cost $20,000 contracted fee with a network provider, the consumer will be required to pay $2,000 as deductible + $3,600 as 20% of 18,000, amounting to a total of $5,600, provided the max out-of-pocket limit here is above $5,600.

Coinsurance amounts count in towards the annual maximum out-of-pocket limit as consumer protection.

What are coinsurances in a typical plan?

• Most plans have 100% coinsurance meaning, the consumer does not have to pay any coinsurance (0% coinsurance from a consumer perspective) after the deductible is met.
• Other values go 90%, 80%, 75%, 70% etc. When the coinsurance increases, typically the gap between deductible and maximum out-of-pocket limit also increases.
• A slight increase in co-insurance (from a consumer standpoint) can reduce the premium, as the healthcare cost is further shared by the member.

How is it paid or billed?

• Just as deductibles, the exact coinsurance amount is not determined at the point-of-service location. They are billed subsequently. Health Plans provide an Explanation of Benefits statement.

Fixed Cost includes the cost of administration and services, stop-loss premiums.

Administration and services may include claims administration, network fee, pharmacy benefits manager fee, disease and utilization management, preventive care programs, member outreach, and other programs etc.

Stop-loss premiums include a premium for claims exceeding the Individual Stop Loss (ISL) limit, and premium for aggregate claims exceeding the maximum liability (Aggregate Stop Loss). ISL may be alternately called Specific Excess Loss.

ISL Premium

The carrier or the TPA reinsures the payment of individual claimants that exceed a certain limit defined as ISL Deductible. This can be $50,000 or $85,000 or $20,000 for smaller employers). The higher the ISL limit amount, the lesser the stop-loss premium charged by the Stop-loss carrier who is a reinsurer.

The stop-loss carrier estimates this based on assessing specific large losses, assessing and predicting the likely usage of treatment plans (e.g. cancer treatment) that may be in progress.

In certain circumstances, a specific single claimant may be excluded from this stop-loss coverage and that may have to be covered from the claims funds. Such limitations or lasers are identified and defined ahead of time. The idea here is to treat such as outliers so that they do not impact the premium of the larger population.

ASL Premium

The carrier or the TPA reinsures the payment of aggregate claims that exceed the maximum liability funds, which is already 25% excess of expected claims. This excess factor called aggregate corridor can be sometimes only 10% in the case of smaller firms.

Maximum Claims Funds Cost is 25% excess of annualized expected claims cost to sufficiently fund all claims with the exception of claims exceeding the ISL limit. The annualized expected claims cost is determined based on the past aggregate claims incurred with certain trend factors and weightage factors.