The Difference Between Copays, Coinsurance, and Out-of-Pocket Maximums
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Three cost-sharing terms that appear on every health plan — and that most people mix up. Here's a clear breakdown of each.
Why These Three Terms Get Confused
When you look at a health plan's Summary of Benefits, three numbers tend to blur together: the copay, the coinsurance percentage, and the out-of-pocket maximum. They all represent money you could owe for medical care, but they work through completely different mechanisms. Mixing them up leads to real surprises at the billing window — or worse, choosing a plan that doesn't match how you actually use healthcare.
This reference breaks each one down cleanly so you can compare plans on equal footing. For a broader look at how these terms interact with your deductible and premium, see how deductibles, premiums, and copays fit together.
| Copay structure | Fixed flat fee per visit or service |
| Coinsurance structure | Percentage of the covered service cost |
| Out-of-pocket maximum | Annual spending cap on covered cost-sharing |
| When coinsurance applies | Typically after your deductible is met |
| Common coinsurance split | 80/20 (insurer/enrollee) is a frequent arrangement |
| ACA out-of-pocket limit (2024) | $9,450 for individual coverage (Healthcare.gov, plan year 2024) |
Copays: A Fixed Fee Per Service
A copay (short for copayment) is a flat dollar amount you pay for a specific covered service — typically at the time of the visit. For example, a plan might charge $25 for a primary care visit and $50 for a specialist visit, regardless of what the actual service costs. The insurer absorbs the rest.
Copays are predictable by design. You know before you walk in the door exactly what you'll owe. That predictability makes them easy to budget for routine care. However, copays may or may not count toward your deductible, depending on the plan, so always check your Summary of Benefits. Some plans also charge different copays for urgent care, emergency rooms, and mental health services.
Copay
A fixed dollar amount you pay for a specific covered healthcare service, such as a doctor visit or prescription. The amount is set by your plan and does not vary with the actual service cost.
Coinsurance
The percentage of a covered medical bill you are responsible for after meeting your deductible. For example, 20% coinsurance means you pay one-fifth of the allowed cost; your insurer pays the rest.
Out-of-Pocket Maximum
The annual cap on what you pay in covered costs. After reaching this limit through copays, coinsurance, and deductible payments, your insurer pays 100% of covered services for the rest of the plan year.
Deductible
The amount you pay for covered healthcare services before your insurance begins sharing costs. Coinsurance typically applies only after the deductible is satisfied.
Allowed Amount
The maximum amount your insurer will pay for a covered service based on its contract with providers. Coinsurance is calculated on this negotiated amount, not the provider's full billed charge.
Coinsurance: Your Percentage of the Bill
Coinsurance is a percentage of a covered service's cost that you pay after your deductible has been met. If your plan has 20% coinsurance and an approved procedure costs $1,000, you pay $200 and your insurer pays $800. Unlike a copay, the dollar amount you owe scales with the cost of care.
This is where surprises happen. A 20% coinsurance rate sounds manageable until a hospitalization generates a $40,000 bill — suddenly your share is $8,000. That's exactly why the out-of-pocket maximum exists, which is covered next.
20%
Typical coinsurance rate for many employer plans
A common coinsurance arrangement is the enrollee paying 20% of covered costs after the deductible, though rates vary widely by plan design.
$9,450
ACA individual out-of-pocket maximum (2024)
The Affordable Care Act sets a ceiling on out-of-pocket costs for in-network, covered services in compliant plans; this figure applies to individual coverage in 2024.
Coinsurance typically kicks in after you've satisfied your deductible. For a detailed look at how deductibles feed into this cycle, see what a health insurance deductible actually does to your costs.
Out-of-Pocket Maximum: Your Annual Cost Ceiling
The out-of-pocket maximum is the most you'll pay in covered costs during a plan year. Once you hit that number — through any combination of copays, coinsurance, and deductible payments — your insurer covers 100% of covered services for the remainder of the year.
This is a critical consumer protection built into ACA-compliant plans. It caps catastrophic financial exposure. However, costs that don't count toward it — like premiums, balance-billed amounts from out-of-network providers, or non-covered services — can still add up. For more on how the deductible and out-of-pocket max work in tandem, see deductible vs. out-of-pocket maximum.
What Doesn't Count Toward Your Maximum
Monthly premiums never count toward your out-of-pocket maximum, and neither do costs for non-covered services or amounts balance-billed by out-of-network providers. This distinction matters when estimating your true annual exposure. Always confirm which expenses your plan counts — and which it doesn't — by reading your Summary of Benefits carefully.
Your plan type — HMO, PPO, or EPO — also affects which providers and costs count toward these numbers. See how plan structures affect your coverage and costs for a side-by-side comparison.
How All Three Work Together
In a typical plan year, these three mechanisms sequence like this: you pay full cost until your deductible is met, then you split costs with your insurer through coinsurance (or pay flat copays for certain services), and once your total out-of-pocket spending reaches the maximum, your cost-sharing obligation stops for the year.
When comparing plans, look at all three numbers together rather than focusing on just one. A low-premium plan with high coinsurance and a high out-of-pocket maximum can be expensive if you need significant care. A plan with higher premiums but low copays and a low maximum may cost less overall for someone with ongoing needs. See what copays, coinsurance, and deductibles each cover in a health plan for more on how these pieces interact.
This article is for general informational purposes only and does not constitute insurance or financial advice. Coverage terms vary by plan and provider. Always review your plan's Summary of Benefits and Explanation of Coverage, and consult a licensed insurance agent or adviser for guidance specific to your situation.
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