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What is the key difference between copayment and coinsurance?

  1. Copayment is based on a percentage

  2. Coinsurance is a fixed amount paid

  3. Copayment is a set dollar amount; coinsurance is a percentage

  4. There is no difference

The correct answer is: Copayment is a set dollar amount; coinsurance is a percentage

The key difference between copayment and coinsurance lies in their structures for cost-sharing in health insurance. A copayment is a fixed dollar amount that a policyholder pays for a specific service, such as a doctor’s visit or a prescription drug. For example, a plan might require a $20 copayment for each office visit, meaning the insured pays that set amount regardless of the total charge for the visit. On the other hand, coinsurance is a percentage of the total cost for a service that the insured is required to pay after meeting any deductible. For instance, if an individual has a health care bill of $100 and their coinsurance rate is 20%, they would pay $20, which is 20% of the total cost. Understanding these differences is crucial because it affects how much individuals will ultimately pay for healthcare services and helps them budget for medical expenses accordingly.